The CFPB has released a new report, “Financial well-being in America,” and a new on-line interactive tool that allows consumers to measure their own financial well-being and access CFPB resources intended to help consumers meet financial goals.

In January 2015, the CFPB issued a report in which it created a definition of “financial well-being”:  “a state of being wherein a person can fully meet current and ongoing financial obligations, can feel secure in their financial future, and is able to make choices that allow enjoyment of life.”  The definition was followed by the CFPB’s release in December 2015 of a 10-question scale to measure “financial well-being.”  The scale, which produces a financial well-being score between 0 and 100, is intended to allow meaningful comparisons of financial well-being between people and over time.

In the new report, the CFPB presents the results of what it calls a “first-of-its-kind national survey on the financial well-being of U.S. consumers.”  According to the CFPB, the consumer sample used to conduct the survey was designed to be representative of U.S. households. In addition to responding to the 10 questions in the financial well-being scale, people participating in the survey answered questions about other measures such as individual, household, and family characteristics; income and employment; savings and safety nets; financial experiences; and money behaviors, skills, and attitudes.

In the report, the CFPB presents the survey’s findings on the distribution of financial well-being scores for the U.S. adult population overall and for selected subgroups defined by these other measures.  In the CFPB’s view, its findings “provide insight into which subgroups are faring relatively well and which ones are facing greater financial challenges” and raise “important questions about what may drive variations in financial well-being within subgroups and how these factors may work together to determine an individual’s level of financial well-being.”

The report’s major findings include:

• Using the CFPB’s 0 to 100 scale, the average financial well-being score for U.S. adults was 54. There was a 35-point spread between the top 10 percent and the bottom 10 percent of scores.  About a third of all adults in the United States had financial well-being scores of 50 or below, about a third had scores between 51 and 60, and about a third had scores of 61 or above.
• Financial well-being scores reflect real differences in underlying financial circumstances, with scores of 50 or below associated with both a high probability (well above 50%) of struggling to make ends meet and of experiencing material hardship and scores of 61 and above associated with low probability (less than 10%) of having trouble paying for basic needs or making ends meet.  The CFPB believes these results suggest that the financial well-being scale is a helpful measure for gauging how individuals are faring financially.
• Savings and financial cushions provide the greatest differentiation between people with different levels of financial well-being, with the average financial well-being for adults with the lowest level of savings (less than $250) at 41 as compared to 68 for adults with the highest level of liquid saving ($75,000 or more).  The CFPB observed similar differences in scores when it looked at capacity to absorb unexpected expenses.  The CFPB believes these findings highlight the importance of savings and other safety nets in helping people to feel financially secure.
• Certain experiences, such as whether someone had been contacted by a debt collector or used a payday loan or similar product, seemed to have a strong negative association with financial well-being.  According to the CFPB, while these associations could simply reflect the correlation between these experiences and a general lack of financial resources, these experiences could have more specific and direct relationships with financial well-being.
• Higher levels of financial know-how, confidence, and certain day-to-day money management behaviors appeared to have strong and positive relationships with financial well-being.  Individuals with relatively high levels of financial knowledge and financial skills had higher average financial well-being.
• Employment status, income, and educational attainment seemed to have a strong relationship with financial well-being.  Financial well-being appeared to be higher for older adults, especially those aged 65 and older.  There were no differences in average financial well-being based on U.S. region or as between men and women.  While the CFPB found some differences between financial well-being for various racial/ethnic groups, such differences were relatively small compared to the differences between subgroups based on financial experiences, attitudes, behaviors, and skills.

We find it strange that the CFPB’s press release describes as a “major finding” that 43 percent of consumers surveyed reported struggling to pay bills and 34 percent reported experiencing material hardships in the past year.  However, this is not included among the key findings in the CFPB’s executive summary in the report.