A 3rd of Individuals could not cowl $ 2,000 earlier than the pandemic

Before the pandemic, one in three American families could not handle a medium-sized financial hardship, according to a report from the Stanford Center on Longevity and the Global Financial Literacy Excellence Center.

About 27% of American families failed to meet unexpected $ 2,000 expenses in a month, and 33% struggled to make ends meet in January 2020, right before the Covid-19 pandemic, the report shows.

The report examined Americans’ financial resilience since the Great Recession, as measured by a person’s ability to manage a $ 2,000 expense, total debt, and emergency savings.

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Although insecurity is widespread, it is more common among women, blacks and Hispanic Americans, those ages 30-44, and those with less education, the analysis shows.

Those with poor financial resilience recovered more slowly from the Great Recession than the general population, which the report said contributed to prosperity gaps and economic inequality.

“While college graduates experienced faster job and income growth, these vulnerable groups recovered more slowly,” said Jialu Liu Streeter, co-author and research scientist at the Stanford Center on Longevity.

Pandemic recovery

While the pandemic continues, there are already signs of an uneven recovery among workers.

For example, a December 2020 survey by the Stanford Center on Longevity found that atypical workers – part-time, on-call, temporary, self-employed, and gig workers – were less likely to have job security, emergency preparedness, retirement plans, and adequate insurance.

However, other surveys have shown that workers who have not lost their jobs have increased their savings since the pandemic began.

Nevertheless, many employees can now benefit from federal aid. In 2021, poverty could decline due to government programs like economic checks, child tax credits, food aid and more, the projects of the Urban Institute.

Suggested solutions

Vulnerable groups are slower to recover from economic downturns, and the report suggests four ways to address these deficits: increasing incomes, reducing debt, expanding risk protection, and increasing financial literacy.

Those living below the poverty line may struggle to set aside $ 2,000 for an emergency, and the report suggests gig economy work as a flexible or temporary option to increase income.

However, the report also states that these workplaces may not lack protective measures such as employee benefits.

Studies have shown that student loans delay home buying, planning a marriage, or starting a family.

Jialu Liu Streeter

Research Fellow at the Stanford Center on Longevity

While those with less education tend to have lower financial resilience, the report showed that those with high student loans were also vulnerable.

“Research has shown that student loans delay home buying, planning a marriage or starting a family,” Streeter said.

College students may need to compare their student debt to potential earnings to minimize the burden, she said.

Another shortcoming is health insurance, and the report shows that Hispanic Americans are the least likely to have their entire families covered.

However, families may not realize that they can qualify for free or discounted rewards through Healthcare.gov. Registration in autumn starts on November 1st, 2021.

Although financial literacy has been challenging, more states are adding high school classes and some workers could improve their education through financial wellness programs in the workplace, Streeter said.

The Stanford Center on Longevity and the Global Financial Literacy Excellence Center used panel data from before and after the Great Recession to measure their impact and recovery across groups. The report is funded by the Investor Education Foundation of the Financial Industry Regulatory Authority.

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