Families are leaning on debt for necessities and getting hit harder by late fees

The news: Families are stressed about their financial well-being, according to the Federal Reserve’s Economic Well-Being of US Households report.

• About 64% of parents living with children under the age of 18 said they were at least doing okay financially in 2023, down from 69% in 2022.
• This is well below the average: 72% of all adults said they were all right financially, versus 73% in 2022.

Why is this happening: The top financial challenge for all adults was inflation, despite the inflation rate falling last year.

But more families felt worse financially due to expensive childcare and grocery costs. About 11% of parents with young children experienced hunger within a month of taking the survey.

Parents are getting hit with late fees:

• About 37% of US consumers were charged at least one late fee over a 12-month period, per Nerdwallet’s 2024 State of Consumer Credit Report. Credit card late fees were the most common type: 21% of US adults incurred at least one in the past year.
• And again, parents were hit hardest: 61% of parents with children under the age of 18 had to pay a late fee, compared with just 28% of nonparents and parents of older children.

They're also leaning on debt to purchase necessities.

• About 16% of US adults use their credit cards to pay for necessities because they couldn’t afford them outright, per the survey. And 12% anticipate doing so in the coming 12 months.
• 8% of US adults have also used buy now, pay later (BNPL) to pay for necessities. A similar share anticipated using BNPL for necessities in the next year.
• BNPL use overall was higher among parents: 37% used BNPL in the past month.

Looking forward: US consumer confidence increased in May after falling for the previous three months, per The Conference Board. But the index is still low by historical standards. Consumers said food prices had the biggest impact on how they view the economy.

It will likely take time before consumers, especially parents, feel better about their finances. We will likely see parents continue to lean on debt to get by, and late fees will still remain a concern for families—especially while CFPB battles for its late-fee rule in court.