According to a new research looks at the financial resilience capability of Americans since the Great Depression and it has found that about one third of families in America weren’t in a position to handle a mid-sized financial shock before the Covid-19 pandemic hit the world.
The Global Financial Literacy Excellence Center at the George Washington University (GFLEC) and the Center on Longevity at Stanford University released the new report and policy brief titled “Financial Resilience in America.” The analysis was carried out using data from the FINRA Foundation’s National Financial Capability Study to look at three proxy measurements: one’s ability to come up with $2,000 within 30 days to pay for emergency expenses, perceived level of indebtedness, and adequate savings to cover three months of living expenses.
Researchers found that about 33% of American families not financially capable of handling a mid-sized financial shock before the COVID-19 pandemic. Because of this, their short- and long-term financial security goals are hampered and that effectively impedes people’s ability to make ends meet, pay down debt, pay for medical bills and save for retirement.
The team also found that economic downturns caused by financial shock puts pressure on personal finances because of lost jobs or reduced income.
Researchers recommend that to improve financial resilience and address the inequality gaps, there should be:
- Mandated living wage.
- Expanded risk protections against adverse health events.
- Implementing systematic and targeted financial education programs.
- Relieving student loan debts and curbing the cost of higher education.