Related Articles
-Editorial
Last year saw a notable decline in financial well-being among parents with younger children, according to a recent Federal Reserve study. The Survey of Household Economics and Decisionmaking (SHED) revealed that the percentage of parents with children under 18 who felt financially secure dropped from 69% in 2022 to 64% in 2023, continuing a decline from a record high of 75% in 2021.
Experts largely attributed this decline to the expiration of the pandemic-era expanded child tax credit and reduced support for childcare groups. According to Columbia University’s Center on Poverty and Social Policy, the expiration of the tax credit has led to lower disposable incomes, increased poverty, food hardship, and greater financial strain for many families with children.
The “Economic Well-Being of U.S. Households in 2023” report, which draws from the 11th annual SHED conducted in October 2023, provides a comprehensive look at the financial lives of U.S. adults and their families. While the overall financial well-being of the population remained similar to 2022 levels, it remained below the high of 78% reported in 2021. The report highlights that inflation continued to be a top financial concern, despite a falling inflation rate over the past year.
Key findings from the report include that 72% of adults felt they were doing at least okay financially, nearly unchanged from 73% in 2022. However, financial well-being specifically for parents with children under 18 fell by 5 percentage points from 2022. Despite the challenges posed by inflation, labor market indicators such as job starts and pay raises remained strong.
The Center on Budget and Policy Priorities highlights that extending and expanding key tax provisions in 2025 should focus on the Child Tax Credit, the Earned Income Tax Credit (EITC) for adults without children, and enhanced premium tax credits for Affordable Care Act (ACA) marketplace coverage. These measures have proven successful, contrasting sharply with the failure of corporate tax rate cuts and other regressive tax policies. For instance, the expansion of the Child Tax Credit under the American Rescue Plan significantly reduced child poverty rates in 2021, a change that should be made permanent. Similarly, the Rescue Plan’s EITC expansion assisted approximately 16 million low-wage workers without children, and the 2024 ACA open enrollment saw historic increases in coverage, with most enrollees securing plans for less than $10 a month. However, while these tax credits provide crucial support, federal investment is still lacking in areas such as child care, home-based care for the elderly and disabled, and affordable housing, which remain unaffordable for many families.
President Joe Biden reaffirmed his commitment to supporting care workers, family caregivers, and advocates in April by pledging to restore the child tax credit, increase child care funding, and enhance staffing in nursing homes. Vice President Kamala Harris will most likely continue this proposal as a candidate.
Income and spending patterns also showed significant changes. Thirty-four percent of adults reported an increase in their family’s monthly income in 2023 compared to the previous year, while 38% reported increased monthly spending. Forty-eight percent of adults managed to spend less than their income in the month before the survey, similar to 2022 figures but lower than during the pandemic peak years of 2020 and 2021.
Employment data indicated stability in job-related metrics, with the rates of new job starts and pay raises remaining steady compared to 2022 and above 2021 levels. Childcare costs continued to be a significant expense for working parents, with median monthly costs reaching $800 and increasing to $1,100 for those requiring 20 or more hours of care per week.
Emergency expense readiness remained an issue, with 63% of adults able to cover a hypothetical $400 emergency expense using cash or its equivalent, unchanged from 2022 but down from 68% in 2021. Additionally, changes in prices over the past year adversely affected 65% of adults, with 19% reporting significant negative impacts.
Banking access showed disparities, with 94% of adults having a bank account but notable gaps persisting among lower-income, younger, and minority populations. Credit application trends remained stable, though denial rates increased slightly.
The report also highlighted housing challenges, with median monthly rent payments rising to $1,100, a 10% increase from 2022. Financial impacts from natural disasters affected 19% of adults, with 7% reporting moderate to severe effects.
Education and retirement savings trends showed mixed results, with most degree holders affirming the value of their education, yet a lower percentage of non-retirees feeling on track with their retirement savings compared to 2021.