Consumer Financial Health Study Financial Health Segmentation

Acknowledgements

Defining Financial Health 2. Are you able to pursue opportunities? 3. Do your daily financial activities support both of these goals? 1. Are you prepared for the unexpected?

We asked America, How are you?

What we heard... 27% of Americans report having less than $1,000 saved for retirement. 43% of Americans describe themselves as struggling to pay bills and credit payments. 30% of American households can only make ends meet for 3 months or less if they were to experience a sudden drop in income

Survey Details Survey Vendor: GfK Survey Timing: June – August 2014 Sample Size: 7,100+ consumers – nationally representative sample; over-sampled consumers with under $50k annual income; weighted data to general population Method: Online – homes without internet access were provided ISP services and a netbook; English and Spanish

Survey Topics Financial Health Indicators Financial Products & Services Psychographics Checking account Savings account Prepaid card Payroll card Direct deposit Credit products Internet & mobile banking mRDC, , text Check cashing Other non-bank financial services Day-to-day Monthly cash flows Monthly debt obligations Keeping up with bills Budgeting Resilience Savings habits Plan for expenses Handle job loss Health & life Insurance Opportunity Retirement savings Planning horizon Credit score Risk aversion Financial stress Confidence about meeting financial goals Sense of being in control Attitude toward trying new technology Attitude toward debt Attitude toward fees Provider/product loyalty Demographics Age, income, marital status, education, geography, kids in household, employment status Note: This list is intended to be illustrative of major areas covered in the survey; however, it is not an exhaustive list.

Segmentation Latent Class analysis to form segments Variables based on financial health definition –Day-to-day financial management –Resilience –Opportunity –Attitudes 7 segments identified

About the Survey About the Survey Survey Key Findings

Key Takeaways More than half of the U.S. population (57%) is struggling financially. 1 4

Financial Health Segments

’ Financial Health

Plan Ahead: Large Irregular Expenses 29%

Budget or Spending Plan

Saving Habits

Non-Mortgage Debt-to-Income Ratio

Key Takeaways More than half of the U.S. population (57%) is struggling financially. Consumers’ behaviors and attitudes within financial health segments are consistent across the core elements of financial health. 1 2

Consistency Across Financial Health Measures HealthyCopingVulnerable Total (%) ThrivingFocusedStableStrivingTenuousUnengagedAt Risk Day-to-Day I seldom or never juggle bill payments My household never runs out of money before the end of the month I do not always find myself living paycheck to paycheck My household keeps up with all bills and payments without any difficulties I do not worry all the time about meeting monthly expenses I always pay off my credit cards in full I am confident I can meet my short-term saving goals My finances do not cause me significant stress I am highly satisfied with my present financial condition Financial obligation ratio under 40% My household plans ahead for large, irregular expenses My household has a budget or spending plan that is used to guide monthly spending Resilience I am very or somewhat confident I could come up with $2,000 if an unexpected need arose within the next month My household could make ends meet for more than three months if faced with a drop in income My household has $10,000 or more in liquid savings At least one person in my household has health insurance At least one person in my household has life insurance Opportunity Non-mortgage debt-to-income ratio under 40% I do not have too much debt right now My household has $10,000 or more in retirement savings I am confident I can meet my long-term goals for financial security I have the skills and knowledge to manage my finances well I am willing to take some risk when I save or invest I save regularly with a plan When I think about saving money for the future, the most important time frame is the next 5-10 years or longer

Day-to-Day

Resilience

Opportunity

Key Takeaways More than half of the U.S. population (57%) is struggling financially. Consumers’ behaviors and attitudes within financial health segments are consistent across the core elements of financial health. While income influences financial health, consumer behaviors – esp. planning ahead and saving – also have an impact on consumers’ financial health

Income Doesn’t Tell the Whole Story

Behaviors Matter Plan ahead for large, irregular expenses Habit of saving regularly

Key Takeaways More than half of the U.S. population (57%) is struggling financially. Consumers’ behaviors and attitudes within financial health segments are consistent across the core elements of financial health. While income influences financial health, consumer behaviors – esp. planning ahead and saving – also have an impact on consumers’ financial health The financial services community has an opportunity to help consumers adopt and sustain behaviors that contribute to improved financial health.

For Financial Service Providers Are we helping them pursue opportunities? 3. Do the products and services we provide them each day support them in reaching these goals? 1. Are we helping consumers prepare for the unexpected?

... and Beyond More than half of American adults are struggling financially. They manage more complex financial lives than ever before. Significant consumer need Financial health requires: supportive economic environment available, robust social services individual persistence access to high-quality financial products and services Financial services ecosystem

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Questions? Jeanne Hogarth

Thank you! Connect with us #finhealth Linked In: Center for Financial Services Innovation Download the report:

Healthy Segments 2 ThrivingFocusedStable Most satisfied with their present financial condition Most confident in their ability to achieve their short- and long-term financial goals. Most long-term outlook; 100% say their most important timeframe for saving for the future is five years or more Focused on saving for the next few years; 0% say their most important timeframe for saving for the future is five years or more

Tenuous Coping Segments Striving Planners: 100% plan ahead for large, irregular expenses, and highest rate of budgeting (73%). High debt: 39% says they have too much debt right now, and 40% has a non-mortgage debt-to-income ratio of 40% or more. Non-planners: 0% plan ahead for large irregular expenses, and low rate of budgeting (37%). High debt: 47% says they have too much debt right now and 47% has a non-mortgage debt-to-income ratio of 40% or more.

Tenuous Vulnerable Segments 2 StrivingUnengagedAt Risk Most frequently answer "don't know“, and most risk averse. Low-to-moderate debt: 20% are debt-free, while 33% has a non-mortgage debt-to-income ratio of 40% or more. Most precarious financial situation: 27% could only make ends meet for a week or less if income fell suddenly, and most likely to frequently juggle bills. High debt: 63% has a non-mortgage debt-to-income ratio of 40% or more.

Predicting Monthly Income