WASHINGTON (AP) — Americans’ financial health reached its highest level in nearly a decade last year, the Federal Reserve said Monday, boosted by a strong job market and government aid payments.
Nearly eight in 10 adults said they were “doing well or living comfortably” last fall when it came to their finances in 2021, according to an annual Fed survey, the highest percentage saying so since the survey began in 2013.
The survey of 11,000 adults was conducted in October and November, when inflation reached 6% year-on-year, although gas and food prices spiked before the Russian invasion of Ukraine. The Fed did not ask specific questions about the impact of inflation on Americans’ financial situation.
The investigation also took place before the massive global microwave wave of COVID cases occurred in late 2021, causing some Americans to cut back on travel and other spending.
The financial health captured by the report helps explain the consumer resilience to higher pricesas consumer spending, adjusted for inflation, has continued to rise, even though inflation has been high for nearly 40 years.
The report found that members of all racial groups reported healthier finances, with Hispanics showing the strongest improvement and whites the smallest.
Nearly seven in 10 people said they could afford an unexpected expense of $400 with cash or its equivalent, the highest since 2013. Yet 11% said they wouldn’t be able to afford it at all.
People with children also reported a sharp increase in financial well-being, with three-quarters saying they were doing “at least well” financially, an increase of eight percentage points from 2020 and four points more than in 2019, before the pandemic.
The boost for parents likely reflected the reopening of schools, Fed officials said, allowing more parents to work and reduce their childcare spending. The expansion of the child tax credit, included in President Joe Biden’s $1.9 trillion financial aid package, was also likely a major factor, Fed officials said.
Lower-income parents reported the greatest increase in their financial health. For those who made less than $25,000, the percentage who said they were at least doing well rose from 40% to 53%.
The extended child tax credit included monthly payments of up to $300 per child to most parents. Higher-income parents said they mostly saved the money, while of those with incomes less than $50,000, three in ten said they spent most of their money on housing, while 15% said most of it went on food. .
The Federal Reserve first asked about cryptocurrency in the investigation. It found that 12% of Americans had owned crypto in the past 12 months, but only 3% had used it in financial transactions. The Fed said 2% used it to make a payment, and 1% used crypto to send money to someone, Fed officials said.
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