The 10 Biggest Financial Struggles Families Face
Many American families were struggling to pay the bills before COVID-19, and the pandemic certainly didn’t make things easier. Financial hardships like layoffs and pay cuts made an already tough situation even trickier to navigate.
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Among U.S. adults who say their financial situation has gotten worse since the start of the pandemic, 44% expect it will take them at least three years to get back to where they were a year ago, according to a 2021 survey conducted by the Pew Research Center. This includes 1 in 10 who don’t think they will ever financially recover from the pandemic.
Even families who made it through the past year with little-to-no financial consequences directly tied to the pandemic still face a myriad of financial issues. Despite doing their best to stay afloat financially, many are finding it hard to keep up with standard expenses.
If this sounds familiar, you’re not alone. Here’s a look at the 10 biggest financial concerns faced by U.S. families in 2021.
Last updated: June 21, 2021
Healthcare Costs
Having health insurance is a crucial way to keep the cost of care down, but 28.9 million non-elderly Americans were uninsured as of 2019, according to the Kaiser Family Foundation. This is problematic, considering Healthcare.gov cites the cost of fixing a broken leg as up to $7,500, while the average cost of a three-day hospital stay is $30,000.
Read: 10 Things To Know If You Don’t Have Health Insurance
In total, U.S. healthcare spending was $11,582 per person in 2019, according to the Centers for Medicare & Medicaid Services. Health insurance makes a massive difference in overall spending, but having coverage can still come with hefty bills.
Insured workers contributed an average of $5,588 for family coverage in 2020, according to the KFF. This is a serious amount of cash — especially for those already stretching their budgets to pay the bills.
See: Healthcare Expense Mistakes To Avoid
Debt
Total outstanding consumer debt reached a new high of just under $14.9 trillion in 2020, according to Experian. This includes a variety of different types of debt, including mortgage loans, auto loans, student loans, credit card debt, home equity lines of credit, personal loans and retail credit card debt.
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In total, the average American has a debt balance of $92,727, according to Experian. Some of the debt averages included in this total are credit cards — $5,315 — HELOC — $41,954 — and personal loans — $16,458.
Once in debt, it can be hard for families to get out. Being forced to pay high interest rates, combined with a lack of extra money to put aside in savings, can make it difficult to pay debt down at all — much less entirely.
Learn: How Much Debt Americans Have at Every Age
High Cost of Living
Different parts of the country have vastly different costs of living. Families residing in states like Hawaii, Washington, D.C., New York, California and Massachusetts face much higher living expenses on average than those in states like Mississippi, Kansas, Oklahoma, Alabama and Tennessee, according to the Missouri Economic Research and Information Center.
For example, the median income homeowners needed to live comfortably in Washington, D.C. is $142,230 per year, dropping to $122,934 annually for renters, according to a GOBankingRates study. Conversely, the median income to live comfortably as homeowner in Memphis, Tennessee is just $63,595 per year, rising to $69,331 for renters.
Explore: The Real Value of $100 in Every State
Loss of Job
More than four-in-10 American adults or someone in their household have lost their job or had their wages cut since the beginning of the pandemic, according to the Pew Research Center. Considering May 2021 Bureau of Labor Statistics data revealed it takes an average of 19.3 weeks — five months — to find a new job, this can easily cause financial hardship.
Find Out: Smart Ways You Can Prepare For Job Loss While You’re Still Employed
The unemployment rate reached record highs last year, peaking at 14.8% in April 2020. Thankfully, it has steadily declined to 5.8% in May 2021, but that’s still a long way from the 3.7% realized at the same time in 2019.
More than one-quarter — 27% — of people who lost their job or experienced an income disruption in 2020 had to seek help from a food bank, according to the Prudential Wellness Census Special Report. Another 10% received assistance from a charitable organization.
Learn: 6 Career Mistakes To Avoid During an Economic Downturn
Low Pay
Having a job doesn’t necessarily make it easy to pay the bills. More than half — 61% — of employed people are having an increasingly difficult time keeping up with their financial obligations, according to Prudential.
As of 2019, the average American worker earned $51,916 per year, according to the Social Security Administration. While half the population earned more, the other half earned less.
Specifically, 247,000 American workers earned the federal minimum wage of $7.25 per hour in 2020, according to the BLS. Approximately another 865,000 workers earned wages that fell below the federal minimum.
When paid even minimum wage, a 40-hour workweek amounts to gross earnings of $290 — or $1,160 per month. This can make it impossible for families to keep up with basic living expenses.
Find Out: Who’s Actually Working for Minimum Wage?
Lack of Savings
As of 2019, the average American family has just $5,300 in savings, according to the Federal Reserve. In addition to making it hard to reach future savings goals — i.e., putting money aside for a down payment on a home — this can make it hard to stay financially afloat in emergency situations.
Experts recommend having three to six months’ worth of expenses in an emergency fund. According to Ally, the average 25-to-34-year old spends $4,705 per month. This means an ideal emergency fund should have a balance of $14,115 to $28,230 by age 30, $17,799 to $35,599 by age 40 and $18,846 to $37,693 by age 50.
See: 40 Money Habits That Can Leave You Broke
Not Saving Enough for Retirement
When retirement seems far away, other financial obligations often take precedence for American families. However, workers should be saving 15% of their pre-tax income for their golden years, according to Fidelity.
Find Out: Should You Put Money Into Retirement or Your Savings? Here’s How To Know
Unfortunately, only 36% of non-retired adults think their retirement savings is on track — with 44% saying it’s not on track, according to the Federal Reserve. Alarmingly, 13% of people aged 60 and over have no retirement savings, rising to 42% of 18-to-29-year-olds.
While it might not seem like a big deal that nearly half of younger adults don’t have any retirement savings, starting late can make it hard to catch up.
Learn: 12 Essential Money Tips for Every Phase of Your Financial Life
College Expenses
Many parents have college dreams for their children, but they’re still paying off their own student loans. As of 2020, there were 165.2 million student loan accounts, holding an average balance of $38,792, according to Experian.
A college degree can offer a myriad of benefits, but it doesn’t come cheap. For in-district students, tuition at a public two-year college costs an average of $3,440 per year, rising to $9,410 per year for in-state students at public four-year school, according to the College Board. Out-of-state students pay an average of $23,890 per year for tuition at a public four-year school, while a private four-year college costs approximately $32,410 annually.
Guide: How Much Money To Set Aside Each Month for College
Extracurricular Costs
Enrolling kids in extracurricular activities can help them learn and grow in many ways. However, these pastimes can add up fast.
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For the 2018-19 academic year, required school participation fees averaged $161 for sports, $86 for arts and $46 for clubs and other activities, according to the C.S. Mott Children’s Hospital National Poll on Children’s Health. When combined with other expenses — i.e., equipment and travel — total costs averaged $408 for sports, $251 for arts and $126 for clubs and other activities.
This can put parents in a tough position, because they want their kids to be involved, but many struggle to pay the fees associated with extracurriculars.
Learn: How To Avoid Paying Back the Child Tax Credit
Child Care Expenses
Many employed parents rely on day care and nannies to take care of their children while they’re at work. While essential, this doesn’t come cheap, as 85% of parents are spending at least 10% of their income on child care, according to the 2021 Cost of Care Survey conducted by Care.com.
The survey also revealed 57% of families spent more than $10,000 on child care in 2020 and 59% plan to spend more than $10,000 in 2021. Obviously, this isn’t a small amount of money, so it’s easy to understand why many families struggle to afford the child care they need just to hold a job.
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