Financial Well-Being

Financial well-being is a marker of economic success in itself, affords adults control and autonomy over their lives, and allows parents to invest in the well-being of their children. Rising incomes reflect upward economic mobility and can facilitate greater financial well-being. In contrast, people with low or irregular incomes and insufficient savings are less able to weather life’s inevitable challenges and disruptions, leading to instability and stress that can undermine the ability to make effective decisions and contribute to feelings of powerlessness.

To see more information on the predictors related to financial well-being that the Working Group considered, as well as references for the research described on this page, see the section “Boosting Upward Mobility: A Supporting Framework” in the report.



Income is a strong indication of a family’s material well-being. Families need a certain base level of income to meet their basic needs for food, clothing, shelter, health care, and any costs related to sustaining a job. Further, children raised in higher-income households demonstrate higher academic achievement and educational attainment, better physical and mental health, and fewer behavioral problems than their peers from lower-income households.

Metric: Household income at the 20th, 50th, and 80th percentiles

Household income is a standard measure of financial well-being. The Working Group recommended the metrics at these three levels to track how and for whom incomes are changing in a given place as well as whether incomes are rising across the board or are rising more for those with higher incomes. To identify income percentiles, all households are ranked by income from lowest to highest. The income level at the threshold between the poorest 20 percent of households and the richest 80 percent is the 20th percentile. Similarly, the threshold between the poorest and richest halves is the 50th percentile (or median), and the threshold between the poorest 80 percent and richest 20 percent is the 80th percentile.

Validity: These are well-established measures, and several federal agencies and many scholars frequently use them to assess families’ financial well-being.

Availability: Data on household income are available from the Census Bureau’s American Community Survey and Public Use Microdata Sample. 

Frequency: New data for the metric are available annually. For subgroup analyses in less populated areas, several years of data may need to be pooled to obtain reliable estimates.

Geography: Data are available at the county and metropolitan levels.

Consistency: Income data are measured the same way across all geographies in the same year. The measure is fairly consistent over time, but changes in the phrasing and sequence of income source questions might affect comparisons over time. When such changes have occurred in other federal surveys, such as the Current Population Survey, the Census Bureau provides bridge-year data so users can assess the effects of survey changes

Subgroups: The metric can be disaggregated by race or ethnicity, gender, and other demographic factors. For less populated areas and for certain demographic groups, several years of data may need to be pooled to obtain reliable estimates.

Limitations: The purchasing power of any particular level of income will vary based on the local cost of living. Also, because household sizes differ, the same income may be stretched across larger average households in some places relative to others. Like all metrics based on the characteristics of people living in an area, it can change because of residential mobility.

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Financial Security

Financial security extends beyond income and reflects the overall ability of a household to meet its current and future financial obligations and withstand potential financial shocks. Research finds that even a modest amount of savings can help buffer a short period of being unemployed or help face a medical emergency. Financial security can also include access to credit, debt loads, and financial management.

Metric: Share of households with debt in collections

This metric accounts for the share of households in an area with debt that has progressed from being past due to being in collections.

Validity: Delinquent debt as measured by debt in collections is a valid and strong measure of financial distress.

Availability: Drawn directly from credit reports, the credit bureau data are national and uniform across the country. The data are restricted and are not accessible directly from credit bureaus but are made available publicly on the Urban Institute’s Debt in America website.

Frequency: New data for this metric are available annually.

Geography: Data on households with debt in collections are available by zip code or county.

Consistency: The share of households with debt in collections can be measured consistently for all geographies. The measure is likely to remain consistent over time unless the credit bureaus change the way overdue debt is captured in credit reporting.

Subgroups: The credit bureau data do not include information about race. But the debt value can be disaggregated by subarea when used in combination with the American Community Survey to identify the racial or ethnic composition of neighborhoods (zip codes) with more or less debt in collections. We distinguish zip codes that are majority non-Hispanic white or majority nonwhite. We define a majority as at least 60 percent of residents.

Limitations: Along with the limitations related to subgroups, these data do not capture “credit invisible” households, meaning those without a credit record. As a measure of financial well-being, even if few households have debt in collections, many may still have too little wealth or savings to be primed for upward mobility. This metric is somewhat sensitive to residential mobility. If many residents without overdue debt move in or out of a county or zip code, or if many residents with overdue debt move in or out, this metric could shift.

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