Roughly one in six households couldn’t pay all their monthly bills in 2023, a report released by the Federal Reserve shows
Nearly two-thirds of US households say their financial situation worsened last year, while one in five assessed their ability to meet payments as becoming “much worse,” according to an annual survey published by the Federal Reserve on Tuesday.
The Fed’s Economic Well-Being of US Households report for 2023, focused on the financial lives of US adults and their families, showed that overall financial well-being was nearly unchanged from the previous year, but was below the high recorded in 2021.
“Despite the moderating pace of inflation, many adults continued to indicate that higher prices were a challenge in managing their finances,” the report reads.
In 2023, US inflation cooled to 3.4% after hitting 9.1% in the previous year in the wake of the coronavirus pandemic. As of last month, annual inflation was 3.4%, according to the Consumer Price Index. That figure was a decline from 3.5% in March, but remained above the Fed’s 2% target.
“The [Fed] Committee seeks to achieve percentages over the longer run,” the report added.
According to the Fed’s survey, 72% of adults said they were “doing at least OK financially.” That figure marked a slight change compared to 73% in 2022. It was also down from the record high of 78% in 2021, but was above the low of 62% registered in 2013.
The survey also revealed a major divergence among households. Around half of those polled could cover a $2,000 emergency expense, while 18% of adults said the largest emergency cost they could afford using only savings was under $100, and 14% said they could handle an expense of up to $499. Overall, 17% of US adults reported they couldn’t pay all their monthly bills in full in the month before the survey, which was carried out in October 2023.
Financial well-being was generally unchanged from 2022 for most population segments, the Fed’s report stated, admitting that parents living with children under age 18 were a notable exception. The share of respondents from that group who said they were “doing okay” dropped to 64% from 69% in 2022 and from 75% recorded in the previous year.
Nearly three out of ten parents living with children under age 13 used paid childcare, according to the survey, which revealed that they spend a median monthly amount of up to $1,100 for help each week. Parents shell out up to 70% as much on childcare as on housing, which is typically the largest expense for households.
