Financial Anxiety and Stress among U.S. Households: New Evidence from the National Financial Capability Study and Focus Groups
Andrea Hasler, Annamaria Lusardi, and Olivia Valdes
Summary: The economic impact of the COVID-19 crisis has brought to light the deeply rooted financial struggles that many Americans face. This paper shows that even before the pandemic, a substantial share of households was already anxious and stressed about their personal finances. The greatest levels of anxiety and stress were expressed by women, young adults, those with lower income, those with more financially dependent children, those who are not married, and those who are unemployed. In this paper, we analyze factors likely contributing to high levels of financial anxiety and stress. The empirical analysis is based on the FINRA Foundation’s 2018 National Financial Capability Study (NFCS) and complemented by findings from focus groups that were conducted in 2020. We find that lack of assets, high debt, and money management challenges are major contributing factors to high levels of financial anxiety and stress. We also find that financial anxiety and stress can have long-term consequences: those who are financially anxious and stressed are less likely to plan for retirement. Financial literacy seems to matter. Those who could correctly answer three questions designed to measure basic financial literacy are significantly less likely to feel financially anxious or stressed. Finally, focus group findings reveal that individuals who experience financial anxiety and stress engage in daily monitoring of their finances and make decisions that are informed by their financial worries.
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