Financial literacy is a critical component of education and, as many studies have shown, one where many Americans have room for improvement. Financial literacy works for some people – people just getting into the job market, students, and prime consumers. But when it comes to improving financial health and outcomes for the non-prime New Middle Class, the solution is not as simple as urging non-prime consumers to plan their finances better. For consumers with non-prime credit scores (below 700), planning is often an unrealistic luxury.


That’s because planning assumes you know what’s coming in and when. Non-prime Americans struggle with a variety of financial issues that hinder their ability to plan: income volatility, lack of access to credit, and a higher likelihood of living paycheck-to-paycheck. Despite -- or perhaps, because of -- these challenges, non-prime consumers are more financially savvy than you may think. Improving their financial health is not about teaching them what they’re supposed to do; it’s about improving their circumstances so they can act on that knowledge.


According to our research, more than two-thirds of non-prime consumers we surveyed said they understand how to plan for major expenses and are careful about spending, and 72% know how to create a budget. Plus, an impressive 81% report that they spend less than they earn--the foundation of a strong budget.


Americans with non-prime credit are also keeping close tabs on their finances: our research shows they check their bank account balances an average of 22 times per month, compared to the 15 times that consumers with prime scores check their balances. And they check their credit scores more often than their prime counterparts.


So if it’s not an issue of financial literacy, what can we do to help non-prime consumers improve? Consider this: About half of the non-prime population reports that their income fluctuates month-to-month, which can complicate the budgeting process and make it difficult to plan long-term. And lack of access to credit can make it harder to cover a shortfall or rebound following an unexpected expense; our research shows that a small number of non-prime consumers (7%) have even strategically used their banks’ overdraft protection features to cover expenses they can’t afford to pay immediately.


Financial literacy is undoubtedly important, but to drive lasting results and improvement for non-prime Americans, we must also find solutions as a society for the ongoing massive macroeconomic changes we have seen and will continue to see. That’s beyond what we can address here.


For members of the new middle class to graduate from maintaining short-term budgets to establishing long-term financial plans -- in order for them to make measurable and lasting improvements to their financial health -- financial products and solutions must extend beyond education to address problems like income volatility and lack of access to credit.