What is financial health? It is:
- Ability to consistently meet your basic needs (e.g., housing, food).
- Ability to cope financially with life’s ups and downs.
- Access to and ability to use resources to unlock new economic opportunities.
Why do these things matter? Well, for #1 and 2, when people aren’t able to do these things, they are at risk for material hardship and destabilizing events like evictions and utility cut-offs, or they put off important things like seeing a doctor or buying enough food. By themselves, these are bad things, but these events and circumstances are also associated with a bunch of other bad outcomes like poor child development, domestic violence, poor health and mental health, and child maltreatment. So with #1 and 2, the idea is to promote household’s economic stability.
Bottom line is this: How we acquire and use material resources (like, but not limited to money) affects our quality of life in a lot of different ways. If we are able to do this in a way that provides a good quality of life, then we’re financially healthy.
But we can’t stop there. It’s not enough to hope that people have just the basics and can avoid getting knocked off their horse if they lose a job or a car breaks down. The basis of the extreme economic inequality we see in the U.S. is that resources and opportunities to get ahead and perhaps do a little better financially than your parents are not equally available to everyone, especially households of color. This is bad for everyone as extreme inequality harms economic growth.
Why households? Households are the economic unit of analysis, meaning households have members (e.g., parents, kids) who are (usually) financially interdependent. Cash flows in and out of households based on the actions, interactions, and needs of its members. Think about your own family growing up. Someone went and bought groceries and made a meal, which cost money. That transaction – the grocery store purchase was probably made with co-mingled money, and the meal was mostly likely shared. OK, even if the grocery purchased was just made with one person’s money, most likely another person in the household might pick up another household need, like a light bill. You get the picture.