On Sept. 13, the U.S. Census Bureau released its annual report on the state of income and poverty in the United States, highlighting how families fared in 2015. According to the report, median household real income grew 5.2 percent compared with 2014, from $53,718 to $56,516, marking the first year-over-year increase since 2007, a year before the Great Recession. Further, the poorest families experienced the largest gains: Pew’s analysis of the Census Bureau’s data shows that households at the 10th income percentile saw gains of 7.9 percent, and those at the 20th gained 6.3 percent. Taken together, these numbers represent an important step forward and indicate that American families are beginning to feel the benefits of an improving economy.
However, although income is an important driver of family economic security, understanding households’ finances also requires a deeper look at their balance sheets, including assets, such as savings, debt, and expenses. Previous Pew research demonstrated that in 2014 many households were walking a financial tightrope, just one setback away from facing serious financial strain. Similarly, a forthcoming Pew report shows that in 2015 more than half of households reported experiencing a financial shock—an unanticipated expense such as car or house repairs, illnesses, or pay cut—in the past year, and the typical household spent $2,000, nearly half of a month’s income, on its most expensive shock.
Families’ perceptions of their economic situations are another important piece of the financial security puzzle. Although the median household did better in 2015 than in 2014 in terms of income, households continue to struggle with financial concerns. According to another upcoming Pew report, in 2015:
Further, according to 2014 Pew research, such concerns about financial security can be found across the income distribution—1 in 3 families reported having no savings, including 1 in 10 with incomes of more than $100,000 per year—and that is not likely to have changed significantly in 2015. In addition, all households had less slack in their budgets in 2014 than they had a decade before.
Across income levels, many American households are one destabilizing shock away from hardship, which clearly demonstrates that income alone is not a silver bullet. Families know they need more to feel secure. For example, 80 percent of households have lower savings than they say households like theirs should have, and the typical family would need to increase its liquid assets by over $9,000 to achieve those ideal savings levels.
Americans want financial security: When asked to choose, more than 9 in 10 respondents said they would prefer financial stability to moving up the income ladder. Now, we need policies to help them build and sustain their financial cushions.
Sarah Sattelmeyer is an officer and Sheida Elmi is an associate with The Pew Charitable Trusts’ financial security and mobility project.