Even before the pandemic damaged the U.S. economy, about a third of U.S. families did not have enough money set aside to cope with a “medium-sized economic shock,” according to a study by Stanford and George Washington University.
The study, based on a January 2020 survey, also found that people with some college education were often more vulnerable than those without any due to high debt obligations.
The FINRA Foundation, created by the Financial Industry Regulatory Authority, funded “Financial resilience in America“study conducted just before the financial crisis COVID-19, which began in March 2020. (FINRA regulates all investment firms operating in the United States.)
Ultimately, a huge proportion of America’s diverse population suffers from economic insecurity, and the insecurity and turmoil of the COVID-19 pandemic has only made financial resilience even more critical going forward, the study found.
The study examined three areas: unplanned household spending in 2020; and debt and savings levels for households in 2018.
►If an unexpected need arose, 27% of households in 2020 and 31% in 2018 said they would not be able to come up with $ 2,000 to deal with the problem.
►In 2018, 37% of households had too much debt.
► Nearly half (46%) of households in 2018 said they did not have an emergency or rain fund that would cover expenses for three months in the event of illness, job loss, economic downturn or other emergencies.
While a large proportion of Americans have shown a lack of economic resilience in recent years, the numbers were even higher. a decade ago.
In 2012, 39% of households could not come up with $ 2,000 for unexpected needs, 42% of respondents in the survey felt they had too much debt, and 60% could not come up with three months of emergency funds.
Which population groups are vulnerable?
Certain populations of Americans are particularly vulnerable to economic downturns, the study found.
For example, women and minorities face a higher degree of economic insecurity, with black Americans being the least economically resilient, followed by Latin Americans.
Universities also found that as Americans got older and more educated, they were more likely to have emergency savings and demonstrated more economic resilience.
But the trend is reversed when it comes to debt, with the most disadvantaged group being millennials with some college experience.
Half of 30- to 44-year-olds and 41% of people with a college feel they have too much debt.
People with and without university degrees actually report similar difficulties in the flow of money.
For example, 19.9% of individuals without a university degree and 16.2% of people with a university degree “have difficulty making ends meet” for their needs.
However, only 4.1% of those with a bachelor’s degree are below the poverty line, as opposed to 16.7% of people with a high school degree or lower, suggesting that university graduates have higher cost of living and higher debt levels.
The cash flow issues for 30- to 44-year-olds are almost exactly the same percentage as for blacks and Hispanics in America when it comes to “difficulties in making ends meet” and “difficulties in covering all expenses and paying all bills” , “the study found.
“The [30-44 year olds] have high debt burdens (primarily attributed to student loans), childcare costs and mortgages. The debt ratio for this group is high, 136%, compared to 82% for people under 30 or over 60, “it says in study paper.
Essentially, university-educated millennials earn higher incomes, but their debt obligations make them at a similar level of economic resilience as historically marginalized minority groups, the study found.
Blacks and Spaniards and those without a university education face lower initial debt levels, but are often subject to predatory loan schemes and pay high interest rates due to lack of financial literacy, according to the study.
Michelle Shen is a Money & Tech Digital Reporter for USATODAY. You can reach her @ michelle_shen10 on Twitter.
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