1) The Financially Unengaged Reaching the 16% of Americans Who Aren’t in Touch With Their Financial Standing 7 US Financial Health Segments According to the Center for Financial Services Innovation’s 2014 study on consumer financial health, a whopping sixteen percent of the country is unengaged with their financial situation. This segment Healthy Coping Vulnerable earns its name from these consumers’ lack of awareness about their financial lives and Thriving Focused Stable Striving Tenuous Unengaged At Risk their low level of engagement with traditional financial services. These consumers answer “don’t know” to survey questions and “neither agree nor disagree” to questions about their attitudes and preferences more than any other segment. People who fall into this segment span all income levels and represent diverse demographics. Who Are They? 39 Million American AdultsAdults Adults Age 39 MillionMillion American 39 American Age Are Financially Unengaged Unengaged Are Financially Unengaged Are Financially Age 65+ 65+ 50-64 50-64 50-64 36-49 36-49 36-49 26-35 26-35 26-35 18-25 18-25 18-25 Race/Ethnicity 65+ 12% Gender Gender Gender 12% 19% Male 23% 23% 23% 21% 51% 51% 51% 49% 49% 49% 12% 21% 19% 26% 26% Household Income 50% 24% 18% White, Non-Hispanic Hispanic Black, Non-Hispanic 6% $60,000 - 99,999 32% have children 11% 17% $30,000 - 59,999 26% Less than $30,000 2% Other, Non-Hispanic $100,000 or more Female 21% 19% 26% MaleFemale Female Male 46% 2+Races, Non-Hispanic Total US Population Age 65+ 29% 36-49 18-25 23% 17% 13% Race Male 18% 50-64 26-35 Household Income Gender 50% $100,000 or more Female 50% $60,000 - 99,999 26% Hispanic $30,000 - 59,999 27% Black, Non-Hispanic Less than $ 30,000 25% 22% White, Non-Hispanic Other, Non-Hispanic 2+ Races, Non-Hispanic 68% 14% 11% 6% 1%
2) What Behaviors Does This Segment Exhibit? Planning They are vulnerable to a financial shock. » ne in three plan ahead for large, O irregular expenses. ? » 2% do not know how long they could make ends 6 meet in the event of a sudden drop in income. Attitudes þ 21% say their finances cause them significant stress. þ 78% are not willing to take any financial risks when saving or investing. þ 26% are confident they can meet their short-term Saving Most do not have significant retirement savings. » 2% have a regular saving habit, 35% save 2 whatever money is left over at the end of the month, and 38% do not save. For 46%, the most important timeframe for saving for the future is the next few weeks or the next few months. » 7% have less than $1,000 in non-retirement 5 savings, and 54% have less than $1,000 in retirement savings. savings goals. þ 24% are confident they can meet their long-term goals for becoming financially secure. þ 30% believe they have the skills and knowledge to manage their finances well. þ 66% are only slightly or not at all confident they could come up with $2,000 in a month in an emergency. þ 28% expect their financial situation to be better in five years than it is today; 39% do not know. Debt They are unaware of how much their monthly debt obligations are. $ » 7% have student loan debt, 18% have medical debt, 2 and 40% have other non-mortgage debt. » 6% do not know how much their monthly debt 8 payments are, so a financial obligation ratio could not be calculated for most of the segment. What Products Are They Using? » 8% do not have a checking account. Of those, 70% have never 2 had a checking account. Compared with the US population, individuals who are financially unengaged are the least likely to own a checking account, a savings account, or a credit card, and they are the most likely to have never owned these products. Individuals in this segment are among the least likely to perform financial transactions at a bank branch, ATM, online, or via mobile channels. » 0% do not have a savings account. Of those, 51% have never had 5 a savings account. 28% do not have a checking account. $ 50% do not have a savings account. » 5% do not have a credit card. Of those, 69% have never had a 5 credit card. » 1% have a prepaid card, and 5% have a payroll card. 1 » 3% use online banking and 27% use mobile financial 3 services regularly.* » 1% use cash always or often to make purchases. 6 » 0% pay bills in person always or often. 3 » toring money at home is a way that 25% of this segment saves. S * Mobile financial services includes mobile banking, receiving an SMS alert from a financial services provider, and using mobile remote deposit capture. Regular use = in the last 30 days.
3) How to Reach 39 Million Unengaged Consumers The financially unengaged have manageable debt, low levels of financial stress, and self-awareness about the state of their money management skills. Providers have an opportunity to serve this segment by further exploring their financial pain points and testing innovative solutions to uncover: » hat are the most effective strategies for reaching these W consumers? Do partnerships with entities that have trusted relationships with members of this segment - such as schools, service organizations, community groups, and faith-based communities – work, and, if so, what are the elements of successful partnerships? » hat is driving the lack of awareness or engagement amongst W this segment? Do they not wish to engage or have they not identified products that meet their needs? Can smart design of default settings help individuals in this segment get the most out of products and services without having to engage deeply or proactively? Do smart, automated bill payment and/or saving features appeal to this segment? Can financial services providers connect with and help Unengaged consumers by calling out their financial pain points and corresponding impacts? » an credit-building products or credit counseling services C provide an effective avenue for engaging this segment? A third of this segment could not estimate their credit quality, 8% did not know they had a score, and more than half of those who provided consent to pull their score (and were matchable by Experian®) had a subprime or deep subprime score. Is helping consumers build and improve their credit histories a successful strategy for providers to build a trusted and mutually-beneficial relationship with members of this segment? Read More and Engage To engage with the dialogue, follow us or use #finhealth. @cfsinnovation LinkedIn Facebook Support for this Brief MetLife Foundation is a major sponsor of CFSI’s ongoing consumer financial health work, including these segment briefs. About the Consumer Financial Health Study The Consumer Financial Health Study benefited from guidance and generous financial support from Ford Foundation and MetLife Foundation. The Consumer Financial Health Study also benefited from generous financial support from American Express. The Center for Financial Services Innovation launched its Consumer Financial Health Study to better understand the current state of financial health in America and consumer challenges. For more on the study – including details on the survey instrument, methodology, financial health indicators, and financial health segmentation – download the segmentation whitepaper: http://bit.ly/ConsumerFinHealth Copyright 2015 Center for Financial Services Innovation ALL RIGHTS RESERVED