Middle-income households under pressure as finances are squeezed

Despite stable incomes nationwide, rising costs have squeezed household budgets and not just for those on the lowest incomes.  

Individuals in the $25K–$75K income range, those with some college education, and adults aged 35–54 report difficulties normally associated with lower-income cohorts, particularly with making ends meet, managing food costs, and building emergency savings.

Two‐thirds of all adults noted they had to cut back due to higher food prices, and fewer respondents express satisfaction with their financial condition.

The findings are from the sixth wave of the National Financial Capability Study from the FINRA Investor Education Foundation, the first comprehensive data survey since 2021 and conducted between June and October 2024 with more than 25,500 respondents.

It reveals a troubling reversal in Americans’ financial resilience, particularly among middle-income households.

The share of Americans with sufficient emergency savings (sufficient to cover three months of living expenses) fell from 53% in 2021 to just 46% in 2024. This measure of financial resilience had been trending higher over the past decade.

“The 2024 National Financial Capability Study reveals a concerning shift in Americans' financial resilience. After more than a decade of improvements, we're seeing many households—particularly in middle-income brackets—struggling financially despite stable incomes. This 'struggle of the middle' signals that rising costs are creating financial strain across a broader segment of the population,” said Gerri Walsh, President of the FINRA Foundation.

The report also highlights changes in consumer behaviour with credit card habits backsliding. Consistent full-month credit payments decreased by 6 percentage points from 2021. Additionally, 23% have utilized Buy Now, Pay Later (BNPL) services in the past year.

Financial literacy, gauged through a standard quiz covering five questions, remained steady overall, but understanding of inflation improved: 58% of respondents answered the inflation question correctly, up from 53% in 2021. The most substantial gains occurred in younger adults (18–34), whose correct responses rose from 34% to 44%.

And 20% of US adults expressed interest in receiving financial advice from artificial intelligence. This signals growing acceptance of digital advice tools and presents significant potential for advisory services to integrate AI-enhanced tools alongside human guidance.

Advisors checklist:

1. Targeted Support for Middle-Income Clients
   Advisors must recognize the financial fragility creeping into middle-income households. Customized guidance on budgeting, debt management, and emergency preparedness can make a critical difference.
2. Reinforce Savings Discipline
   With dwindling emergency funds and tighter budgets, proactive conversations about rainy-day planning and systematic saving mechanisms are essential.
3. Module Credit & BNPL Education
   Explain the real cost of delayed payments and BNPL options—ensuring clients understand their long-term financial impact.
4. Leverage AI Wisely
   Advisors should explore reputable AI tools to enhance service delivery, while clarifying their limitations. Given rising openness to AI advice, piloting these tools could deepen client engagement.
5. Preserve Financial Literacy Gains
   While knowledge on inflation is up, the plateau in overall financial literacy suggests ongoing education is needed—especially tailored to different age groups and educational backgrounds.