Why Many American Families Feel Financially Insecure Going Into 2024 (2024)

FAQs

Why Many American Families Feel Financially Insecure Going Into 2024? ›

High levels of inflation, record household debt, and average salaries not keeping up with the rising cost of living are having a negative impact on Americans' overall feelings of financial security, according to a new MarketWatch Guides survey.

Job openings remain high, and the unemployment rate has held below 4% for more than two years straight. But Americans are also grappling with the highest interest rates in two decades and chronically high inflation that has made the cost of everyday necessities like groceries, rent and gasoline far more expensive.

One big culprit fueling financial anxiety is a familiar one — the high cost of living. More than half of respondents (54%) expect price pressures to increase this year, and only 9% said their household income was outpacing inflation.

Nearly 40 million families, or 29% of the population, fall in the category of ALICE — Asset Limited, Income Constrained, Employed — according to United Way's United for ALICE program, which first coined the term to refer to households earning above the poverty line but less than what's needed to get by.

Currently, 72% of upper-income, 42% of middle-income and 25% of lower-income Americans rate their situation as excellent or good. Another question in the survey finds 62% of Americans saying they have enough money to live comfortably, similar to the 64% recorded last year but down from 2022 (67%) and 2021 (72%).

It may be that you have too much credit card debt, not enough income, or you overspend on unnecessary purchases when you feel stressed or anxious. Or perhaps, it's a combination of problems. Make a separate plan for each one.

The root cause was excessive mortgage lending to borrowers who normally would not qualify for a home loan, which greatly increased risk to the lender. Lenders were willing to take this risk, as they could simply package the loans into an instrument they sold, passing the risk on to investors.

The high cost of living, wealth inequality and job market uncertainty have all contributed to financial vulnerability, even among wealthy families.

According to data from the Federal Reserve's 2022 Survey of Consumer Finances, the average American family has $62,410 in savings, across savings accounts, checking accounts, money market accounts, call deposit accounts, and prepaid cards.

According to a recent CNN survey, 71% of Americans identify money as a significant cause of stress in their lives. Further, 76% of households live paycheck-to-paycheck and credit card debt is growing.

Are people spending less in 2024? ›

Most of the reasons for last year's growth will continue over into 2024, but at a slower pace. The January 2024 data show a small increase in dollar spending but a tiny decline in inflation-adjusted expenditures. In 2023 consumers increased their total spending by 5.9% (December 2022 through December 2023).

National average income: The national average salary in the U.S. in Q4 of 2023 was $59,384, according to the U.S. Bureau of Labor Statistics. Average salary by age: The highest average earners are aged between 35 and 44, earning 13.8% more than the national average salary.

Key Takeaways

The average American net worth is $1,063,700, as of 2022. Net worth averages increase with age from $183,500 for those 35 and under to $1,794,600 for those 65 to 74. Net worth, however, tends to drop for those 75 and older.

Many Americans carry substantial amounts of debt, including credit card debt, student loans, and mortgages. This debt burden can lead to financial stress, making it difficult to meet everyday expenses and save for the future. Secondly, inadequate savings is another critical factor.

It began rising at a fast rate in the 1980's and was accelerated through events like the Iraq Wars and the 2008 Great Recession. Most recently, the debt made another big jump thanks to the pandemic with the federal government spending significantly more than it took in to keep the country running.

“The answer, in one word, is inflation,” says Alan Cole, senior economic policy analyst at The Conference Board, a business-focused think tank. “[That's] the binding constraint on governments, in the end, that keeps them from issuing gobs of currency and buying whatever they want with it.”

The Fed tries to influence the supply of money in the economy to promote noninflationary growth. Unless there is an increase in economic activity commensurate with the amount of money that is created, printing money to pay off the debt would make inflation worse.