Rachel Schneider

A joint initiative of NYU Wagner’s Financial Access Initiative and the Center for Financial Services Innovation, USFD tracked 235 low- and moderate-income households for a full year to collect highly detailed data on how families manage their finances on a day-to-day basis.

Jonathan Morduch

By tracking everything the families spent, earned, borrowed, saved, and shared in careful detail, Jonathan Morduch and Rachel Schneider uncovered new insights about the financial lives of Americans that traditional studies have missed. In The Financial Diaries, they introduce us to the stories of these families, challenge conventional wisdom about inequality, financial literacy, and how families manage their money, and recommend ways to design financial services policies, programs, and products to better serve American families.

Morduch and Schneider have dedicated their careers to the finances of low-income families—Morduch as an academic economist and Schneider as a financial services expert. In The Financial Diaries, they reveal:

• Stories of real families struggling to plan their futures while remaining financially stable in the present.
• A shocking level of month-to-month income and expense volatility for low- and middle-income Americans. The average household in the study had more than 5 months of the year when income was 25% above or below average, rendering annual income measures insufficient to capture the fundamental challenges families face.
• Families squeezed with no slack—households face rising costs, stagnant incomes and are shouldering more risk, which makes it much harder to deal with volatility. Many families struggle to pay bills this week or this month, even if they have enough income over the course of the year.
• Many more Americans experience poverty than the poverty rate implies. Only a small share of the families were persistently poor. The larger share – some considered middle class by annual measures – dipped below the poverty line several months during the year. This episodic poverty requires fundamentally different policy approaches.
• How families cope —by trying to stabilize spending while allowing for spikes; saving, but unable to build balances over time; borrowing, often at high cost but with no good alternatives; and sharing resources with friends and family.
• What would help families be more secure and in control—better employment practices, stronger government policies, fairer and more beneficial financial services, and new ways to help them manage the cash-flow challenges that result from their financial ups and downs.