Why We Invested in the U.S. Financial Health Pulse
by Sarah Morgenstern and Tracy Williams
Americans’ financial lives have changed profoundly over the past half century, yet the tools for measuring household well-being have failed to keep apace. Per capita GDP, consumer confidence, and other indices constructed more than three generations ago render an increasingly incomplete snapshot of US families’ 21st century realities.
For example, intensifying income volatility, inadequate “rainy day” savings, and the complexities of planning for retirement in a post-pension era — all staple features of Americans’ everyday financial concerns in 2018 — are conspicuously absent in the data we commonly dissect to gauge household welfare.
Since what’s measured is usually what’s managed, the limitations of our economic indicators have deep-seated implications for our national discourse about family well-being. Increased focus on the interplay between household financial anxiety and employee productivity, for instance, could lead to breakthroughs in employer-sponsored financial health solutions.
At Omidyar Network, we believe that a more holistic assessment approach is needed to provide tightly integrated insights into families’ spending, saving, borrowing, and planning habits, unlock important conversations about the interconnections between financial health, physical health, and the future of work, and offer a common lexicon and headline yardstick for measuring collective progress towards improving household welfare over time.
That is why we invested in the U.S. Financial Health Pulse, a rigorous, regularly-refreshed snapshot of the financial health of American adults, including underserved consumers, that will use surveys and customer-level transactional data to provide a unique view into the country’s household financial well-being.
Launched by the Center for Financial Services Innovation(CFSI), a leading voice on US financial health, the Pulse builds on seminal work in this space, including CFSI’s landmark consumer financial health study, which pioneered efforts to translate financial health (i.e., the day-to-day systems that help households to build financial resiliency and promote long-term opportunity) into clearly defined, concrete measures of individuals’ multi-dimensional financial lives. More importantly, CFSI’s 2015 study revealed that more than 55 percent of American households struggle with financial health, underscoring the magnitude of the issue and the imperative for concerted action across the private, public, and social sectors.
The U.S. Financial Pulse will strive to furnish this diverse cross-section of stakeholders with fresh perspectives to deepen understanding, evaluate progress, and spur action. Financial service providers can use the study to inform the design of high-quality products and services that bolster the financial health of their customers — kicking off a virtuous cycle that promises to deliver long-term value for banks and consumers alike.
Consumer advocates, think tanks, and other research groups can use the insights to better understand the financial status of various overlooked populations and design better remedies to address them.
Policymakers and regulators can use the data to craft policies that support financial health and to incentivize innovation and creativity in addressing these challenges through new tools.
Lastly, the data will be made available to academic researchers as a public good, to encourage broad-based financial health research across a range of relevant themes.
At a time when more than half of Americans are struggling financially, improving outcomes for American families has never been so pressing. The Pulse is a crucial step in bringing the right metrics to the forefront of a much-needed national financial health dialogue. Beyond the numbers, for a substantial number of Americans, the consequences of our discourse on these issues might dictate whether families put food on the table, bounce back from unexpected shocks, and can pursue a path to upward mobility.