According to MassMutual’s recent State of the American Family Study, “ One in three American families thinks the American dream is disappearing. ” An even larger 40% of LGBTQ families believe this to be true.
In 2018, MassMutual conducted its fourth study on the state of the American family. This year’s study, consistent with MassMutual’s history of inclusion, studied all kinds of families including same-sex couples with children.
The state of LGBTQ American dreams
Let’s first understand how the LGBTQ families, as a cohort, define “the American dream.” To us, it includes three components, “Achieving financial security and independence, enjoying a comfortable retirement and helping [our] children get an education.”
Nearly eight in 10 LGBTQ families, 79%, define the American dream as “financial security for myself and my family.” Only 36%, however, think they’ll achieve this level of financial security.
The leading financial concern of LGBTQ families, according to this study, are:
- being financially prepared for the unexpected,
- having an emergency savings account,
- paying down debt,
- not becoming a burden to my family and
- feeling confident in both short- and long-term financial decision-making.
Increased employment risk requires increased emergency savings
About three-quarters of LGBTQ families prioritize having a stable source of income as key to overcoming unexpected events, but what happens when that stable source of income is disrupted? It’s still legal in up to 30 states depending on our LGBTQ status to be fired without recourse because of our sexual orientation and gender identity. For this reason, we and not necessarily MassMutual, encourage more LGBTQ people to start their own businesses to at least supplement if not replace employer income.
We agree with MassMutual in that it’s also important to have life and disability insurance. It’s our personal recommendation due to the unique employment risk for LGBTQ people to have six to 12 months’ worth of living expenses saved in an emergency savings account. The standard recommendation for the general population is to have three to six months’ worth of living expenses saved for that proverbial rainy day. The current average is that 37% LGBTQ American families have less than one month’s worth of living expenses saved. Even in a good job market, such as today, one month’s worth of savings is just not enough.
Saving so much money in an account one hopefully never has to use is easier said than done, of course. The only way to start is to put a little aside each paycheck or month until the goal is achieved. To be sure, there are more strategic ways for building an emergency savings account.
Increased financial burdens require more strategy and longer-term financial planning
Study after study, including this MassMutual study, shows that LGBTQ people typically have more credit card debt than our straight peers. MassMutual’s survey suggests that the average LGBTQ family has $12,065 in credit card debt , versus $10,400 of American families overall. It’s not surprising then that 71% of LGBTQ families list paying down credit card debt as a top priority. Fortunately, today, there are more resources than ever to help these families become debt free.
More than 80% of LGBTQ families feel good about their day-to-day financial decision making. It’s the long-term financial planning that’s causing concern, with more than half of survey respondents saying, “they lack confidence with planning for the long-term.” It’s our recommendation that short-term and long-term financial planning shouldn’t be mutually exclusive. Long-term financially planning properly supported by short-term and daily-financial planning is the recipe for short- and long-term financial success for both individuals and families.
While our community claims that retirement is a financial priority, there’s confusion with how to plan adequately and appropriately and a disconnect between our actions and words. MassMutual found that nearly half of LGBTQ families worry about outliving our retirement, yet 59% of us claim that going on more vacations is a financial priority. On the same note, 36% of LGBTQ families are struggling to save what they think is an adequate amount of money for retirement with only 25% saying they feel confident with their retirement plan.
Only 32% of LGBTQ families plan on leaving an inheritance to their family or in a trust. However, it’s the transfer of wealth that has helped American families in the general population survive and thrive from generation-to-generation. It’s this kind of long-term thinking and planning that would benefit the LGBTQ community for generations.
Higher college tuition costs require more robust college savings planning
Finally, more than half of LGBTQ families have made paying for their children’s education a financial and parental priority, yet only 37% feel confident they’ll be able to do so. MassMutual’s study shows that the average LGBTQ family has more than $70,000 in student loan debt. That supports Student Loan Hero’s recent LGBTQ Student Loan study that showed the average LGBTQ person has $16,000 more student loan debt than their straight peers.
The LGBTQ community sees education as critically important for our community. That may be, but education that puts us at financial risk negates the value of that education and adversely affects our mental health. A recent Honeyfi survey of our community revealed that 82% of LGBTQ couples worry about money at least monthly with 58% of respondents admitting to feeling anxious at least weekly.
It’s important for LGBTQ parents to remember to put the oxygen mask to themselves before putting one on their children, meaning that parents should ensure they’re financially secure today and for the future before paying for their children’s college education. The small steps LGBTQ families can take are to open college savings and 529 accounts, whether pre-paid or savings, to save tuition money for their children. Anyone in their children’s lives can contribute to these accounts. LGBTQ families can also look into grants and scholarships, including LGBTQ-specific grants and scholarships.
To be sure, marriage equality in 2015 didn’t give full and fair equality to LGBTQ people and families. Many of us are still navigating a world of systemic and personal discrimination, which may explain why even while we make America great again so many of us feel the American Dream is slipping away. Because of this, maybe even in spite of it, it’s the personal responsibility of the LGBTQ community to take ownership of our finances. The concerns highlighted by MassMutual’s study and the solutions we provided should help LGBTQ families get one step closer to that dream.