One in Three American Families Could Not Cover a $2,000 Emergency Before the Pandemic
Even before the onset of the pandemic, many American families were struggling to make ends meet. According to a report from the Stanford Center on Longevity and the Global Financial Literacy Excellence Center, 27% of American families couldn’t cover an emergency $2,000 expense within a month, as reported by CNBC. On top of that, 33% were already struggling to pay basic bills in January 2020.
The study looked at financial resilience by measuring the ability to cover a $2,000 expense along with total debt and emergency savings. According to research, families lacking financial resilience typically encounter challenges in making ends meet, paying down debt, covering medical costs and saving for retirement.
The analysis also shows that financial difficulties were more prevalent among women, Black and Hispanic Americans, individuals aged 30 years to 44 years old and those with less education, CNBC reported. Additionally, lower levels of financial resilience led to a slower recovery from the Great Recession than the general population. This contributed to wealth gaps and economic inequality.
CNBC noted that as the pandemic continues, there are signs of unequal recovery among U.S. workers; however, many workers may be benefiting from federal aid. The Urban Institute projects a drop in poverty in 2021 due to several government programs, including stimulus checks, child tax credits, food assistance and more.
“With the COVID-19 crisis and its attendant economic consequences, it is critically important to have the financial capacity to weather a financial shock,” according to the Stanford Center on Longevity report. “Understanding the factors that build financial resilience and the variation across American families in terms of their financial situation and money management is essential for developing effective solutions.”
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