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Life got worse for the have-nots this year. Banks can help change that.

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This year marked an unprecedented time in many ways, including for the financial health of American households. And with so many competing headlines, it can seem nearly impossible to make sense of it all.

Credit card balances are more rapidly being paid off while millions of renters are facing eviction. Savings rates are skyrocketing at the same time as food banks lines build up. And of course, political spin and implications are woven into every analysis of the economy.

It’s a new dichotomy where average financial health has never been higher while far too many people are still struggling. More Americans are saving while disparities by race and income are widening. The truth is messy, but it needs telling.

Part of the problem is that most research tends to focus on just one aspect of the economy, like the stock market; or one metric of financial health, like savings rates; or one demographic variable like race. This is great for making news. But it is terrible for making sense.

Very few studies attempt to address the deeply complicated and interwoven picture of financial health that contains these multiple truths. But for the past three years, the Financial Health Network has been trying to do this through its U.S. Financial Health Pulse study.

Findings from the August 2020 trends report found that financial health on the whole was up fairly dramatically. A third of people in America (33%) were considered “financially healthy,” netting a 4- percentage-point increase from April 2019. These positive trends were driven by improvements across nearly all of the eight indicators of financial health. Indeed, financial health went up or stayed flat for almost every single demographic variable analyzed (income, gender, race, etc.).

Frankly, the findings shocked us. We had expected much worse resulting from the record rise in unemployment and economic closures. Of course, given the timing of the study just after stimulus payments were issued and the federal bump to unemployment insurance ceased, this jump could be temporary. And new data on the aftermath suggests that is the case.

Nevertheless, there’s another set of much more challenging findings that appear when the data is put into context. Despite the overall gains in financial health, more than two-thirds of people in America are still not financially healthy.

And many people are experiencing extreme financial hardship: 15% of respondents said they were worried their food would run out and 18% said they were concerned about affording their rent or mortgage since March. That equates to tens of millions of households.

Perhaps most alarming for the future: racial inequality and other financial health disparities appear to be widening. The proportion of Black people considered “financially healthy” has not changed significantly from 2019, while it increased by 5 percentage points for white people and 4 percentage points for those who identified as Latinx.

For banks, this messy truth has important implications. First, since the sky isn’t falling for everyone (at least not yet), banks have the opportunity now to deliver financial health solutions to help those customers, communities and employees who aren’t benefiting from the upward national trends.

This can include tools to help struggling customers build emergency savings, access affordable small-dollar credit, or obtain financial coaching resources. It should include proactive lending to and investing in Black and Latinx businesses, as was recommended in the new Business Roundtable’s racial equity platform. And it means addressing financial health inequities among employees through higher wages, better benefits and more comprehensive financial wellness programs.

Secondly, banks will benefit by examining their own customer data and measuring the financial wellness of their employees with a similarly multifaceted view of financial health. Don’t just look at mortgage delinquencies, 401(k) balances or savings rates. Put all the data together, comprehensively.

Bankers should ask: How financially healthy are my customers and employees across spending, saving, borrowing and planning? How is it changing over time? Which populations are faring better or worse, and are disparities widening or shrinking?

Looking at this type of nuanced data may be uncomfortable, but it’s the key to designing better solutions and assessing progress along the way.

Just days after a hyperpoliticized election, it can be hard to hold on to multiple narratives at the same time. Precisely because of this, it’s never been more important to proactively seek comprehensive, objective measures of financial health in order to guide the financial health solutions that will be necessary moving into an uncertain 2021 and beyond.

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