To view the full report click here

 

Introduction

 

The broad discussion in many circles about the plight of the non-prime consumer often uses assumptions about how these consumers think, what matters to them, and even what would be good for them. However, there is limited data that really explains their circumstances.

Elevate’s Center for the New Middle Class set out to understand the differences in attitudes, experiences and behavior between consumers with prime credit and those with non-prime credit.

This study specifically sought to understand the particular experiences and challenges of non-prime women. The findings come from a survey of 1,217 U.S. consumers (607 with prime and 610 with non-prime credit scores); 730 of the participants were female.

Interviews were conducted November 30 through December 4, 2016.

 

Non-prime Americans

 

“Non-prime Americans” represent the New Middle Class. These are Americans with a credit score below 700, meaning that their access to credit is limited or curtailed. Non-prime is also often further divided into “near prime,” “sub-prime,” and “deep sub-prime.”

 

It is the Center’s objective to better understand non-prime experiences, attitudes, and behavior.

 

The following report seeks to understand the financial experience of prime and non-prime women.

 

Report Summary

 

Non-prime women live within financial situations that are meaningfully more precarious than their prime counterparts.

 

It continues to be widely reported that women’s financial situations lag that of men. However, to effect the greatest change toward closing the gender financial gap, we should focus efforts on improving the financial wellbeing of non-prime women.

 

This segment not only has a greater opportunity for advancement, but their challenges disproportionately affect society: non-prime women are more likely to have children and elderly parents living with them.

 

Executive summary

 

•Non-prime women are twenty percent more likely than their prime counterparts to work full time, but 28% less likely to work on salary.

•Almost two-thirds of them say they live paycheck to paycheck.

•Their financial situation is much more precarious: they are three times as likely as prime women to have lost a job in the prior 12 months, more than twice as likely to have had their work hours reduced, and are much less likely to have a safety net to save them from emergency expenses.

•They are twice as likely to admit that their finances cause significant stress.

•They are four times as likely to admit to having difficulty predicting next month’s income.

•They are 38% more likely than non-prime men to run out of money every month. More than four out of five of them run out of money at least once a year.

•This leads to the need to borrow money just to get by. Almost a third of non-prime women have needed to borrow money to cover standard household expenses. And they borrow more than their prime counterparts for just about everything, except to purchase a home. In that wealth-generating debt, they lag significantly behind.

•The non-prime woman is 41% more likely to have children in her home than a prime woman. She is also 79% more likely to have an elderly parent living with her. She’s also more likely to say that she manages checking accounts, sets the financial plan, and makes decisions on major purchases for the household. Her financial challenges thus extend disproportionately to the young and the infirm.

 

Report implications

 

•Non-prime women need more structural support. They are locked in a financial eddy that makes it difficult for them to make progress.

•Prime women are twice as likely as their non-prime counterparts to have learned how to manage finances from their parents. Non-prime women most commonly learn from trial and error. Financial wellness programs need to better address non-prime women and designed to fit their needs.

•Non-prime women are the least likely group to say they have the skills and knowledge to manage their finances well and are the only group (gender and credit status) where a majority of them feel uncertain. Finding more financial stability is not just crucial for the non-prime woman, but also for the people who rely on her.

•In our effort to close the inequality gap, we will get the most bang for our buck by concentrating on generating better outcomes for non-prime women.

 

Income and employment

 

Employment

 

70% of non-prime women are employed full-time, and they are more likely to do so than prime women.

 

They are less likely to be retired (5% vs. 10%) (not graphed)

 

But they are equally likely to be homemakers (both at 10%) (not graphed)

 

Q5. What is your employment status?

 

Employment type

 

Non-prime women are the least likely group to hold salaried jobs. Both groups of women are less likely than their male counterparts to be salaried (and more likely to hold jobs with hourly wages).

 

Q8. Please indicate below how you are paid by your employer(s)?

 

Lost a job

 

Non-prime women are three times as likely to have lost a job in the prior 12 months.

 

Non-prime women were 45% more likely to have had a change in employment in their household in the past 12 months. (not graphed)

 

 

 

Q10. Which of the following employment events occurred to you or someone in your household in the previous 12 months? “Lost a job (e.g., laid off)”                     

 

Source: Financial Life, Dec. 2016

 

Work hours or pay reduced

 

Non-prime women are more than twice as likely than prime women to have had their work hours or pay reduced.

 

 

Q28_2. You had your work hours and/or pay reduced - Major Life Events in Past 5 Years - During the past 5 years, has your household experienced any of the following significant major life changes or financial events?

 

Source: Financial Life, Dec. 2016

 

Predicting next month’s income

 

Non-prime women are four times as likely to report difficulty in predicting next month’s income.

 

Q11. How easy or difficult is it for you to predict next month’s income for your household? Would you say it is...? Bottom-2 box: Somewhat difficult and Very difficult

 

Source: Financial Life, Dec. 2016

 

Completed college

 

Non-prime women are less likely to have completed college than prime women.

 

S7. What is the highest level of education you have completed?

 

Source: Financial Life, Dec. 2016

 

Day-to-day financial management

 

Living paycheck to paycheck

 

Non-prime women are the most likely group to find themselves living paycheck to paycheck, at nearly 4 times as likely than women in the prime category, and 22% more likely than non-prime men.

 

On a scale of 1 to 5, where 1 is 'strongly disagree' and 5 is 'strongly agree', how much do you agree or disagree with the following statements? Q27_4. I always find myself living paycheck to paycheck -

 

Source: Financial Life, Dec. 2016

 

Run out of money

 

Non-prime women are 65% more likely to run out of money by the end of the month “every month” than non-prime men. They are more than four times more likely to do so than prime women.

 

Non-prime women are also 12% more likely than their male counterparts to have ever run out of money in the past 12 months. (not graphed)

 

Q12. In the past 12 months, how often has your household run out of money before the end of the month, including when you had to use credit to get by?

 

Source: Financial Life, Dec. 2016

 

Run out of money

 

Non-prime women are 4 times as likely to run out of money “monthly” and 4 times as likely to run out “every other month.”

 

They are 2.6x as likely to ever run out of money in a given year.

 

 

Q12. In the past 12 months, how often has your household run out of money before the end of the month, including when you had to use credit to get by?

 

Source: Financial Life, Dec. 2016

 

Overdrafted a savings or debit account

 

Non-prime women are more than three times as likely than women in the prime category to overdraft their bank account monthly.

 

They are also about three times as likely to overdraft at least once per year.

 

 

 

Q18_16. Overdrafted a savings or debit account - Past 12 Month Financial Activities - Please indicate how often you engaged in the following financial activities

 

Source: Financial Life, Dec. 2016

 

Borrowed money for household expenses

 

Non-prime women are the most likely group to have needed to resort to borrowing money to cover household expenses, being almost twice as likely as non-prime men.

 

Q15. Have any of the following events caused you to borrow money in the last 12 months? Borrowing means any use of credit (e.g., credit cards, loans, family/friends, etc.) Standard household expenses (e.g., electric or water bill, Internet, groceries, etc.)

 

Source: Financial Life, Dec. 2016

 

Stress from finances

 

Regardless of financial footing, women are more stressed by their finances than their male counterparts. Prime women are 44% more likely than prime men to say their finances cause them stress, and non-prime women are 24% more likely to feel this way than non-prime men.

 

On a scale of 1 to 5, where 1 is 'strongly disagree' and 5 is 'strongly agree', how much do you agree or disagree with the following statements? Q27_1. My finances cause me significant stress

 

Source: Financial Life, Dec. 2016

 

Covering a financial emergency

 

Money available to cover a $1,200 emergency

 

Only 13% of non-prime women would have the money on-hand to cover an emergency expense of $1,200, meaning 87% would have to borrow money or be unable (11%, not graphed) to cover this financial event.

 

Q17. If you had one week to pay $1,200 for an emergency expense, such as a car repair or medical bill, where would you turn first to get the money? Answer: “Money currently in my checking or savings account, or on my prepaid or payroll card, or with cash”

 

Source: Financial Life, Dec. 2016

 

Confident in ability to cover an unexpected $1,200 bill

 

Non-prime women are 43% less confident in their ability to cover a sudden emergent expense of $1,200.

 

 

Q16. How confident are you that you could come up with $1,200 if an unexpected need arose within the next month?

 

Source: Financial Life, Dec. 2016

 

Use a credit card to cover a $1,200 emergency

 

Non-prime women are less likely to turn first to credit cards to cover a $1,200 emergency, likely indicating it is not a method of payment that is readily available to them. When they do, they are much more likely to pay it off over time.

 

 

 

Q17. If you had one week to pay $1,200 for an emergency expense, such as a car repair or medical bill, where would you turn first to get the money? Answers: “Put it on my credit card and pay it off in full at the next statement” and “Put it on my credit card and pay it off over time”

 

Source: Financial Life, Dec. 2016

 

Debt

 

Too much debt

 

Women in the non-prime category are significantly more likely to say they currently have too much debt.

 

 

On a scale of 1 to 5, where 1 is 'strongly disagree' and 5 is 'strongly agree', how much do you agree or disagree with the following statements? Q27_10. I have too much debt right now

 

Source: Financial Life, Dec. 2016

 

Experience with a payday loan

 

Women in the non-prime category are six times as likely to have ever used a payday loan.

 

 

Q23. 'NEVER USED' SUMMARY TABLE - Frequency of Using Forms of Debt - Which of the following forms of debt have you used? Answer: “Payday loan” (Data represents the inverse of ‘Never’)

 

Source: Financial Life, Dec. 2016

 

Mortgage

 

Non-prime women are the least likely group to hold a mortgage, even more so than non-prime men, indicating homeownership (and the wealth accumulation that comes with it) may currently be out of reach.

 

Q23. 'CURRENTLY USE' SUMMARY TABLE - Frequency of Using Forms of Debt - Which of the following forms of debt have you used? Answer: “Mortgage”

 

Source: Financial Life, Dec. 2016

 

Financial planning

 

Short term savings goals

 

Non-prime women are half as confident as prime women in their abilities to meet their short-term savings goals.

 

On a scale of 1 to 5, where 1 is 'strongly disagree' and 5 is 'strongly agree', how much do you agree or disagree with the following statements? Q27_6. I am confident that I can meet my short-term saving goals

 

Source: Financial Life, Dec. 2016

 

Planning for major expenses

 

Non-prime women are significantly less likely to be planning for major expenses on a regular basis.

 

Q18_2. Planned for major expenses - Past 12 Month Financial Activities - Please indicate how often you engaged in the following financial activities

 

Source: Financial Life, Dec. 2016

 

Financial knowledge

 

Non-prime women are the least confident group in terms of financial management, and they are 43% less likely than prime women and 28% less likely than non-prime men to feel they have the knowledge and skills to manage their finances well.

 

On a scale of 1 to 5, where 1 is 'strongly disagree' and 5 is 'strongly agree', how much do you agree or disagree with the following statements? Q27_13. I have the skills and knowledge to manage my finances well

 

Source: Financial Life, Dec. 2016

 

Learning financial management- parental instruction

 

Q25. Select all the ways in which you learned how to manage your finances: Parent’s instruction

 

Source: Financial Life, Dec. 2016

 

Learning financial management- trial and error

 

Non-prime women are 21% more likely than women in the prime category to report they learned how to manage their finances by trial and error.

 

Q25. Select all the ways in which you learned how to manage your finances: Self – trial and error

 

Source: Financial Life, Dec. 2016

 

Methodology

 

The primary purpose of this study was to determine how nonprime Americans were similar or different from those with prime credit on a range of behaviors and attitudes.

Interview Dates: December 6-14, 2016

Sample Specs:

Total Respondents = 1,217 (730 were female)

Sample Source: Research Now Consumer Panel

Qualification Criteria:

Ages 18-64

Personal income: Any

Geography – U.S. Rep

Has primary or shared responsibility managing HH finances

Employment: No students or unemployed

Has a checking or savings account

Survey Instrument: 15 minute online questionnaire

 

About

 

About Elevate’s Center for the New Middle Class

Elevate’s Center for the New Middle Class conducts research, engages in dialogue, and builds cooperation to generate understanding of the behaviors, attitudes, and experiences of America’s growing “New Middle Class.”

For more information, visit: www.elevate.com/NewMiddleClass 

 

Contact

    NewMiddleClass@elevate.com

    @NewMidClass

     Facebook.com/NewMiddleClass