WASHINGTON—Nearly a quarter of U.S. households are living paycheck to paycheck in 2025, according to a new report from the Bank of America Institute, which found that while financial strain continues to rise, the pace of deterioration has slowed sharply from last year.
The release of the report comes at the same time another detailed analysis finds Americans have made little progress in building emergency savings, as the CU Daily reported here.
The analysis, drawn from anonymized internal Bank of America deposit and spending data, estimates that about 24% of households so far this year are spending more than 95% of their income on basic necessities such as housing, groceries, gas, utilities, transportation and childcare. That’s a slight increase from 2024, but the rate of growth is almost three times slower than the jump seen a year earlier.
The Central Pressure Point
Inflation remains the central pressure point, the study found. Consumer prices rose 3% year-over-year in September, the report said, outpacing wage and salary growth for middle- and lower-income households, whose take-home pay increased only 2% and 1%, respectively, in October. That marks the return of a 2024 pattern in which households’ purchasing power eroded even as inflation cooled from pandemic-era highs.
Lower-income households are driving virtually all of the increase in those living paycheck to paycheck. Roughly 29% of lower-income families fell into this category in 2025, up from 28.6% last year. Middle- and higher-income groups saw little or no movement. Bank of America analysts attributed the widening divide to slowing wage gains among lower earners after several years in which pay grew fastest for that group.
Feeling the Squeeze
The squeeze is also hitting certain age groups harder, according to the BofA Institute. Millennials and Gen X households—particularly those in lower-income brackets—saw the strongest increase in paycheck-to-paycheck living. Higher-income peers in those generations have seen stronger wage increases, allowing them to better absorb rising prices. Bank of America said “wealth effects,” including stronger stock and home values, may also be cushioning higher-income households.
Regionally, the South and West continue to have the highest concentration of paycheck-to-paycheck households. But unlike the Northeast and Midwest, those regions saw slight improvement in 2025, a shift analysts linked to lower inflation readings there last year. That trend may not last: inflation has recently accelerated across much of the South and West, especially in Mountain West states, threatening to renew financial pressure after what the Institute described as a “brief respite.”
‘A Clear Signal’
The report notes that its data captures households with primary banking relationships at Bank of America and may not reflect all spending or income sources. Still, the Institute said the findings provide a clear signal that rising prices—combined with slowing wage growth—are continuing to strain the financial margins of millions of Americans, even as the pace of deterioration cools.
