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Insight of the Day: High inflation made finances worse for 65% of Americans last year

High inflation in 2023 negatively impacted the finances of 65% of American households, according to a new Federal Reserve report.

Key Points:

  • Impact of Inflation: Despite slowing down last year, inflation continued to cause financial strain for many Americans, with 19% reporting their finances were "much worse."

  • Financial Well-Being: While 72% of adults said they were "doing okay" financially, this number is lower than in previous years, indicating a decline in overall financial well-being.

  • Income and Spending: Incomes grew in 2023, but so did spending, leaving many households with tight budgets and little money left over after paying expenses.

  • Lower-Income Adults: The impact of inflation was particularly felt by lower-income adults, who reported higher instances of food insecurity, inability to pay bills, and skipping medical care.

  • Unpaid Bills: 17% of adults reported being unable to pay all their bills in full in the month before the survey.

  • Local and National Economy: While perceptions of the local and national economy have improved since 2022, they remain well below pre-pandemic levels.

  • Financial Resilience: 63% of adults said they could cover a $400 emergency expense with cash on hand, indicating some level of financial resilience.

  • Parents with Young Children: This group experienced a significant decline in financial well-being, mainly due to high child care expenses.

  • Child Care Costs: Paid child care expenses amounted to 50% to 70% of monthly housing payments for some parents.

  • Homeowners' Insurance: Many homeowners, especially those in the South with lower incomes, lack homeowners' insurance, leaving them vulnerable to financial risks from natural disasters.

Overall, the report highlights the persistent challenges faced by many American households due to high inflation, particularly those with lower incomes and young children. Despite some signs of economic resilience, the financial well-being of a significant portion of the population remains strained.

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