Financial Health Sees Modest Gains and Lingering Gaps

American households have faced a whirlwind of economic change over the past five years — from pandemic-era government aid to rising inflation and interest rates. The Financial Health Network’s 2025 Financial Health Pulse U.S. Trends Report highlights what factors most impact the financial health of U.S. individuals and households — and provides guidance for how financial providers can help consumers navigate uncertain economic waters. 

On the face of it, the report hints at cautious optimism. For example, some vulnerable households have seen modest relief in spending and debt management, indicating some improvements in the day-to-day lives of many Americans. But, the report also shows long-term progress remains stubbornly elusive for a significant number of individuals and households. 

Here are the key takeaways from this year’s findings:

Vulnerability Declines, but Progress Is Fragile

From Spring 2024 to Spring 2025, households classified as “financially vulnerable” fell from 17% to 15%. While this may seem like a statistically insignificant percent change, it represents more than 2.5 million families.

Some key factors that also show small, but impactful, improvements are: 

• Better debt management: Households reporting unmanageable debt decreased from 30% to 29%. Those with no debt rose from 18% to 20%.
  
  
• Improved saving: More households reported spending less than they earned (increased from 47% to 49%), signaling a greater ability to save.

Relief for Lower-Income and Historically Underserved Groups

While it’s tempting to predict that lower wealth/income households are less likely to show improvements than others, this report tells a different story. Debt management and savings potential rose for households with negative net worth or low/moderate income and, as a result, lowered the percentage of financially vulnerable households in these same groups.

The report highlighted an increase in households spending less than their income in the following groups from 2024 to 2025:

• Low- and moderate-income (LMI) households (36% to 38%)
• Negative net worth households (19% to 24%)
• Renters (36% to 39%)

Correspondingly, these same groups saw a significant decrease in the percentage classified as financially vulnerable between 2024 and 2025.

• Low- and moderate-income (LMI) households (26% to 23%)
• Negative net worth households (56% to 48%)
• Renters (29% to 26%)

These shifts, combined with slight declines in material hardships (such as food insecurity and missed rent or utility payments), suggest that financial resilience is beginning to grow.

Warning Signs: Insurance Confidence and Student Loans

Not all the news from the report is positive. New and changing factors have influenced U.S. consumers' confidence and capacity in the current economic ecosystem. For instance:

1. Insurance confidence is declining.
   Only 56% of households felt confident their insurance policies would cover them in an emergency — down from 59% in 2024, and part of a long-term downward trend. Rising premiums, more frequent natural disasters, and shrinking access in high-risk regions are fueling consumer anxiety.
2. Student loan borrowers are struggling.
   With federal forbearance ending, credit scores for student loan borrowers dropped sharply (69% to 65% reporting “good” or better credit). For many, this is just the beginning: resumed collections, potential wage garnishment, and administrative backlogs could deepen financial strain in 2026.

These trends highlight how quickly financial health can erode if risks are not addressed head-on.

Building Stronger Financial Health with the Right Tools

The report highlights how simple improvements can lead to impactful change — and tools that can help consumers make these small changes. For example, one of the main metrics the Financial Health Network uses to determine financial health is liquid savings, or readily accessible funds in case of an emergency or specific need. But, building a savings habit isn’t easy for many consumers. 

Pulse data shows households with automated savings are significantly more likely to have liquid savings sufficient to handle an emergency. The good news? Thirty-one percent of households now use automatic transfers into savings accounts. And, this translates into improved financial health:

• Households with automated savings are more likely to have more than $2,000 in their checking or savings account than those without automated savings (76% vs 63%).
• Households with automated savings are more likely to have 3 months of living expenses saved (65% vs 58%).

Innovations as simple as this can generate lasting impacts for households looking to improve their financial health. 

That said, this is not a new feature, it has been offered nearly everywhere for years. But, nearly 70% of households do not use it. Financial providers have an opportunity to  improve how they communicate and educate the value that features like automated savings can have for consumers. 

What This Means for the Industry

• Financial distress is easing, but only slightly. While millions of households have made improvements in their financial health, millions more remain one unplanned expense away from hardship.
  
  
• At-risk groups are making progress. Targeted solutions for low-income, negative net worth, and renter households have potentially begun to help close long-standing gaps, but there is still a long way to go.
  

Advancing technology is part of the solution. Simple tools and features  have the potential to drive huge benefits on the financial health of all U.S. consumers. It is up to us to find a way to get the tools into consumers’ hands.