Financially Fragile Households: Evidence and Implications
AbstractThis paper examines households’ financial fragility by looking at their capacity to come up with $2,000 in 30 days. Using data from the 2009 TNS Global Economic Crisis survey, we document widespread financial weakness in the United States: Almost half of Americans report that they are incapable of coming-up with the funds necessary to deal with an ordinary financial shock. While financial fragility is more severe among those with low educational attainment and no financial education, families with children, those who suffered large wealth losses, and those who are unemployed, a sizable fraction of seemingly “middle class” Americans judge themselves to be financially fragile. We examine the coping methods people use to deal with shocks. While savings is used most often, relying on family and friends, using formal and alternative credit, increasing work hours, and selling items are also used frequently to deal with emergencies, especially for some subgroups. Household finance researchers must look beyond precautionary saving to understand how families cope with risk. We also find evidence of a pecking order of coping methods in which savings appears to be first in the ordering. Finally, the paper compares the levels of financial fragility and methods of coping among eight industrialized countries. While there are differences in coping ability across countries, there is general evidence of a consistent ordering of coping methods.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Center for Research on Pensions and Welfare Policies, Turin (Italy) in its series CeRP Working Papers with number 116.
Length: 55 pages
Date of creation: Mar 2011
Date of revision:
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-04-16 (All new papers)
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Atalay, Kadir & Bakhtiar, Fayzan & Cheung, Stephen L. & Slonim, Robert, 2012.
"Savings and Prize-Linked Savings Accounts,"
IZA Discussion Papers
6927, Institute for the Study of Labor (IZA).
- Elliott, William & Kim, Johnny S., 2013. "The role of identity-based motivation and solution-focus brief therapy in unifying accounts and financial education in school-related CDA programs," Children and Youth Services Review, Elsevier, vol. 35(3), pages 402-410.
- Barbara Cavalletti & Corrado Lagazio & Daniela Vandone & Elena Lagomarsino, 2012. "The role of financial position on consumer indebted-ness. An empirical analysis in Italy," DEP - series of economic working papers 8/2012, University of Genoa, Research Doctorate in Public Economics.
- Manuel Adelino & Antoinette Schoar & Felipe Severino, 2012. "Credit Supply and House Prices: Evidence from Mortgage Market Segmentation," NBER Working Papers 17832, National Bureau of Economic Research, Inc.
- Yun Kim & Mark Setterfield & Yuan Mei, 2013. "A Theory of Aggregate Consumption," Working Papers 1301, Trinity College, Department of Economics.
- Hacker, Jacob S. & Huber, Gregory Alain & Nichols, Austin & Rehm, Philipp & Schlesinger, Mark & Valletta, Robert G. & Craig, Stuart, 2012.
"The Economic Security Index: A New Measure for Research and Policy Analysis,"
IZA Discussion Papers
6946, Institute for the Study of Labor (IZA).
- Jacob S. Hacker & Gregory Huber & Austin Nichols & Philipp Rehm & Mark Schlesinger & Robert G. Valletta & Stuart Craig, 2012. "The Economic Security Index: a new measure for research and policy analysis," Working Paper Series 2012-21, Federal Reserve Bank of San Francisco.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Silvia Maero).
If references are entirely missing, you can add them using this form.