Sep 25, 2024
On a single night in 2023, the U.S. Department of Housing and Urban Development calculated that more than 650,000 people were experiencing homelessness nationwide. That's roughly the equivalent of Boston or Detroit's total population. It's a sobering figure, especially in light of another statistic: one quarter of Americans worry that financial peril will drive them to homelessness, according to a recent study.
The 2024 Acorns Money Matters Report, which polled 5,000 U.S. consumers aged 18 and older, paints a grim picture that defies the current description of an economy that features falling inflation and low unemployment. Why is this? Despite this positive outlook, it seems many Americans aren't feeling the effects as they pay high rent prices and experience “shrinkflation” while grocery shopping.
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The Acorns survey found that Gen Z and millennials are nearly three times more likely than older respondents to fear their financial situation could lead to homelessness.
And while big city dwellers are more likely to feel financially secure (37%) compared to those who live in less-populated areas (20%), they're also far more concerned about the prospect of homelessness (32%) than those in the suburbs (18%).
Yet, the dread isn’t necessarily a dead end. Around 35% of Americans believe they’ll be more financially secure next year than today, while 44% think they’ll be about the same security-wise.
Behind and beneath the numbers
The Acorns study identified three top financial concerns that won’t surprise anyone who’s checked their bank balance lately: the cost of living (31%), inflation (27%) and debt (12%). While the first two relate to fixed external factors, debt is more insidious. Many consumers have no idea how bad their situation might be. In 2022, 46% of American households held credit card debt and by late 2023 were paying $106 per month in interest alone, according to the Federal Reserve Bank of St. Louis. That’s money thrown away.
Current events also seem to have a pronounced effect on millennials in terms of financial well-being. This generation cited global conflict (55%), climate change (48%) and artificial intelligence (AI, 44%) as their top concerns, according to Acorns. Fear of AI may stem from potential workplace consequences. There’s even a new term for it: FOBO, or fear of obsolescence. According to the World Economic Forum, more than one-fifth of workers fear machines will replace them, almost double the number in 2017.
And interestingly, the Acorns survey revealed that, as earning power increases, so too do money worries. Of those making less than $40,000 annually, 47% cited financial security as a concern; the numbers climb to 52% for those making $40,000 to $74,000, and 55% for the $75,000-plus group.
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Preparing for the unexpected
Apart from a sudden end to inflation or widespread grocery store price wars, financial security remains an inside job. There’s much we can do to address financial worries — which, even if founded, can easily spiral out of control. Here are three smart ways to recover peace of mind.
1. Create an emergency fund. As for how much you need, three to six months' worth of expenses is a number you’ll see everywhere. As the name implies, this money covers unpleasant financial surprises, from medical bills to car or home damage your insurance policies don’t cover.
2. Invest incrementally. You don’t need deep pockets to start investing — just a little bit of spare change. Some platforms, including Acorns, which is an affiliate partner of Moneywise, can help you enter the world of investing with only the coins in your pocket. As you gain confidence, check out the many automated apps (also known as robo-advisors) that take much of the intimidation and guesswork out of investing. Some apps can be set up to make small, regular withdrawals from your bank account.
3. Meet with a financial adviser. Even the smartest people go about their financial lives with a cloudy sense of the true numbers and where the issues lie. Granted, it’s complicated given that our finances span many issues that include taxes, investment and asset protection. A solid adviser brings all this together to save money, increase investment income — and turn vagueness into clarity.
Correction, Sept. 25, 2024: The Federal Reserve Bank of St. Louis the corrected the amount of interest American households were paying on credit card debt each month in late 2023, and previously corrected the portion of American households that held credit card debt in 2022. The changes have been reflected above.
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Lou Carlozo is a freelance contributor to Moneywise.
