Everyone’s financial situation is unique. We typically think of finances as credit scores, income, and net worth. However, analyzing financial well-being looks deeper by examining our relationship with money. The Consumer Financial Protection Bureau (CFPB) defines financial well-being as “the state wherein an individual has a sense of control over day-to-day and month-to-month finances, capacity to absorb financial shock, being on track to meet financial goals, and the ability to make financial choices to enjoy life.”1
Considering that employment opportunities and availability of products and services vary by region, the CFPB has released the first state-by-state report on financial well-being of adults in America using the CFPB Financial Well-Being Scale. The report uses public data gathered from the Financial Industry Regulatory Authority Investor Education Foundation’s 2018 National Financial Capability Study State-by-State Survey.
The studies indicate the relationship between age and financial well-being. For Arkansas, the average score for all adults age 18 and over is 52 (medium-high). The average score of adults ages 18 to 61 is 48 (medium-low) and the average score for adults 62 and older is 61 (high), leaving a 13 point difference between adults and older adults. The report shows that average financial well-being scores are similar across the United States.
Low and very low scores indicate frequent financial struggles and material hardship, while high and very high indicate the absence of both. In Arkansas, 8% rank very low, 10% low, 24% medium-low, 17% medium-high, 19% high, and 21% very high.
Since low and very low scores identify significant financial struggles and material hardship, the report also looks at the variation in those with low or very low scores and those meeting the poverty level. In Arkansas 18.4% of residents scored low or very low, while 15.4% meet the poverty level. This suggests that factors other than income might be considered when aiding those struggling.
Analyzing financial well-being in your state offers insight to understand how the local economy is affecting citizen’s financial lives. For more details or to see how your state ranks, you can access the full report here.
Look out for our next post about how to improve your financial well-being and a link to the CFPB's financial health quiz.