Military families' financial well-being is a critical aspect of overall readiness and stability. To shed light on the unique financial challenges and opportunities within the military community, USAA Bank announced the first iteration of the Military Financial Wellbeing Index to provide data-driven insights into the financial landscape of service members relative to their civilian counterparts and to document the challenges they face.
What Is the Military Financial Wellbeing Index?
The first Military Financial Wellbeing Index evaluated the financial health of active-duty service members and, to an extent, military families. By examining factors such as savings and checking balances, debt management and use trends, and spending behaviors, the index demonstrates where service members stand financially, highlights areas for growth and provides insights into money trends during the 2019-2023 timeframe.
The 2024 index reveals a mix of encouraging tendencies and ongoing challenges. While many military families appear to be doing relatively better than their civilian peers, they still face significant hurdles, such as rising housing costs and the lingering effects of inflation. These findings underscore the importance of military members making the most of their unique financial opportunities.
Key Findings from the Inaugural Study
The following are some of the takeaways from the inaugural Military Financial Wellbeing Index:
- Saving is clearly a priority. Service members significantly increased their checking and savings balances over the period examined by 23% and 19%, respectively).
- Debt challenges are being addressed. The index revealed that service members' monthly credit-card balances declined by 23% from 2019 to 2023 and that 18% fewer service members were carrying revolving credit balances from month to month. In today's high-interest-rate environment, this is a critical finding.
- The tide could be turning. While the overall trends in checking and savings balances during the 2019-2023 period were positive, things started to deteriorate in 2023 as service members and non-military consumers alike struggled with rising costs. From 2022 to 2023, both savings (10%) and checking (12%) balances declined. I will be interested in what next year's index reveals.
- Credit-card spending is on the rise. Interestingly, credit-card spending has increased across the board. The index reveals increases of greater than 30% on items such as fuel, groceries and restaurants. Clearly, this indicates rising prices, but it could also be an indication of changing habits in terms of how families manage their day-to-day finances. For example, folks could be using credit cards for a bigger share of their daily spending to accumulate points or earn cash-back rewards.
- Younger service members are outpacing their civilian counterparts. The index revealed higher checking and savings balances for Gen Z and Millennial service members compared to their same-aged civilian counterparts. Perhaps the military's emphasis on financial readiness is paying dividends.
Financial Advantages for Military Families
Over the past 15 years of writing articles such as this -- wow, it's hard to believe it's been that long -- I've often shared my view that military life, from a financial perspective, is not so much a handicap or hardship as it is a stepping stone and facilitator to financial security and independence. The results of the Military Financial Wellbeing Index bear that out.
Here are six advantages you should consider leveraging on your own personal journey to financial freedom:
- Thrift Savings Plan (TSP). The TSP is a solid retirement savings plan. It's easy to use and offers low fees and, after a short period of service, includes automatic and matching contributions for those covered by the Blended Retirement System. Military families should prioritize maximizing these contributions to build a solid retirement foundation.
- The military pay system. This year's 4.5% January pay increase (not to mention the additional 10% boost E-1 to E-4 service members will receive in April), combined with the time-in-service and promotion pay raises many military members will receive throughout 2025, provide a huge advantage. Instead of letting those pay increases seep into your everyday spending, be deliberate and direct them to what's important to you and to your family's financial goals.
- Servicemembers Civil Relief Act (SCRA). This legislation offers protections and benefits, such as capping interest rates on certain loans and credit cards during active-duty service. It's a powerful tool for reducing financial burdens and managing debt effectively.
- Basic Allowance for Housing (BAH). While questions about the adequacy of this important tax-free benefit have been in the news, the fact that it exists is a beautiful thing. Military families can leverage BAH to cover or at least offset housing costs. This offers the potential to free up funds for other financial goals.
- Education benefits. Programs such as the GI Bill and Tuition Assistance provide significant financial support for higher education, vocational training and even transferring benefits to dependents. These benefits can reduce reliance on student loans and enhance career prospects.
- Military discounts and resources. From financial counseling services to discounts on everyday expenses, the military community has access to a wealth of resources designed to stretch their dollars and build financial resilience.
A Path Toward Financial Resilience
The USAA Military Financial Wellbeing Index serves as both a wake-up call and a road map. While progress has been made, there is still work to do to ensure that all military families achieve financial stability and peace of mind.
By taking advantage of unique military-specific benefits and wisely using the current and upcoming pay raises, service members and their families can turn challenges into opportunities. Whether you're just starting your military journey or navigating life as a veteran, the key is to take proactive steps today for a more secure tomorrow.
As we move into 2025, make it a priority to assess your financial health and leverage the tools and resources available to the military community. The road to financial resilience is paved with small, consistent actions -- and the journey is well worth it.
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