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To understand the financial security of U.S. households in a comprehensive way, we need to look at how people invest, save, and spend.

Angela Fontes, Director

NORC’s Behavioral and Economic Analysis and Decision-Making (BEAD) team offers expertise combined with real-world experience to understand consumers’ choices, why people make seemingly irrational choices related to finances, and what nudges can help improve financial well-being. We combine our rigorous academic tradition and survey research expertise with a behavioral approach, enabling us to conduct research that informs the national conversation around financial literacy and encourages healthy financial management.

In 2018, the BEAD team partnered with global financial services firm Morningstar to study how investors perceive costs and diversification. We found that regardless of how fees were displayed, when people were given more investment choices from which to select, they were more likely to diversify among mutual funds, even when those funds carried higher fees. However, investors who were presented with fewer choices more frequently chose products with lower fees. These results suggested that the financial services industry can help investors by offering fewer, high-quality products, rather than a dozen of differing quality.

The takeaway: if advisors and fund providers can reduce choice by eliminating high-fee funds from the retirement options offered to clients, clients may choose more wisely and efficiently.

Another recent NORC survey found that the majority of working adults are literally living from paycheck to paycheck, a finding that received media attention for its stark portrayal of household finances. In fact, 51 percent indicate they would experience financial hardship if they missed more than one paycheck. Seventeen percent of those surveyed said they would take out short-term loans if they missed one paycheck—a financial choice that can carry high interest rates (400 to 800 percent) and potentially devastating long-term financial consequences. Another 51 percent said that they would have to dip into their savings to cover necessities, and 15 percent would experience hardship after missing two paychecks.

The precariousness of many Americans’ financial health directly impacts how they pay for their physical health. According to NORC’s February 2020 Spotlight on Health, 1 in 5 Americans reported that they or someone in their household have contributed to a crowdfunding campaign to pay for medical bills or treatments. The survey also found that an estimated 8 million Americans had started a campaign for themselves or someone in their household and more than 12 million Americans had started a campaign for someone else.