Financial Capability In The U.S.

Gender, Generation and Financial Knowledge

New Study from FINRA Shows Millennial Women Beginning to Close the Gap

Research reveals that while overall economic conditions continue to improve, wealth and income inequality remain at extremes. Read the entire report here.

In a recent study using data from its National Financial Capability Study, the FINRA Foundation found that women consistently lag behind men on financial and investor literacy scores across generations. Lower levels of financial and investor literacy among women may impede their ability to accumulate wealth and make sound financial decisions. The study noted a narrower gender gap in financial knowledge among millennials.

The U.S. economy has grown slowly but steadily over the six years since the first National Financial Capability Study (NFCS) was conducted in 2009. And in the three years since the 2012 NFCS, the private sector has added jobs at an average rate of about 200,000 per month. At the time of the fielding of the current NFCS, which took place from June through October of 2015, unemployment and inflation were both low by historical standards. Meanwhile, the U.S. stock market reached new highs in mid-2015 while interest rates remained generally low.

Against this relatively positive economic background, it is not surprising that the 2015 NFCS shows evidence of diminished financial stress and improved financial satisfaction among American adults in comparison to the 2012 and 2009 studies. For example, the percentage of Americans who find it difficult to make ends meet has declined, as has the number of homeowners whose home values are “underwater” (i.e., worth less than they owe in mortgage debt).

Wealth & Income Inequality At Extremes

Wealth and income inequality in the United States, however, is at an extreme not seen since before World War II.1 Because of this, it is necessary to look beyond the mean statistics in order to understand the complete picture of Americans’ financial status. While many Americans are benefiting from the economic recovery of recent years, real median household income is still catching up to its pre-recession level. The 2015 NFCS shows that large segments of society continue to face financial difficulties, particularly minority populations and those without a college education.

While many Americans are benefiting from the economic recovery of recent years, real median household income is still catching up to its pre-recession level

Financial capability is a multi-dimensional concept that encompasses a combination of knowledge, resources, access, and habits. The NFCS is designed to understand and measure a rich, connected set of perceptions, attitudes, experiences, and behaviors across a large, diverse sample in order to provide a comprehensive analysis. As with previous waves, the 2015 NFCS has been updated to include questions on additional topics that are relevant today, such as student loans and medical costs, while maintaining key measures to enable tracking comparisons over time.

Drawing on data from the 2015, 2012, and 2009 NFCS State-by-State Surveys, each of which were nationwide online surveys of more than 25,000 American adults2 , this report3 focuses on the following four key components of financial capability:

  • Making Ends Meet
    The 2015 study shows a continuation of some of the positive trends observed in 2012. Fewer Americans find it difficult to cover their expenses and pay their bills, and more are satisfied with their overall financial condition. However, new questions in the 2015 NFCS indicate that over a quarter of Americans have avoided some kind of medical service in the past year due to cost concerns.
  • Planning Ahead
    The percentage of Americans who say they have set aside three months worth of living expenses in case of an emergency is up to 46% from 40% in 2012. But only 39% report having ever tried to figure out how much they need to save for retirement, and over half worry about running out of money in retirement.
  • Managing Financial Products
    New homebuyers are less leveraged: the percentage of recent home buyers (past 5 years) who made a down payment of over 20% of the purchase price is up to 33%, from 29% in 2012 and 24% in 2009. Also, for the first time since the NFCS was fielded, more than half of credit card users say they always pay their balance in full each month. However, among student loan holders with payments due, 37% have been late with a payment at least once in the past year, and 25% more than once.
  • Financial Knowledge and Decision-Making
    The percentage of respondents who are able to answer at least 4 of 5 financial literacy quiz questions correctly shows a slight downward trend since 2009, despite the fact that Americans’ perceptions of their own financial knowledge have become more positive over the same time period.

Consistent with previous years, the 2015 NFCS finds that measures of financial capability continue to be much lower among younger Americans, those with household incomes below $25,000 per year, and those with no post-secondary educational experience. African-Americans and Hispanics, who are disproportionately represented among these demographic segments, also show signs of lower financial capability, making them more vulnerable.

A copy of this summary and the full report can be found on or by calling (202) 728-6964.