A Population on the Brink: American Renters, Emergency Savings, and Financial Fragility

Abstract

Financial fragility and inadequate emergency savings are commonly associated with lower educational attainment, lower household income, younger age, minority status, and lower rates of financial knowledge and financial literacy. Using the 2012 National Financial Capability Study (N = 25,509), the purpose of this research was to determine if renters, compared to homeowners, were more likely to report financial fragility or inadequate emergency savings. Results of logistic regressions suggest that renters were 75 percent more likely to experience financial fragility and 93 percent more likely to lack adequate emergency savings than homeowners. Considered in tandem with other research on the outcomes of financial fragility, these findings suggest that renters, if confronted with an income or expenditure shock, may not be able to draw upon existing resources and may be at risk for housing instability.

The financial vulnerability trap: using latent transition analysis to explore the dynamics of consumers’ financial vulnerability over time

“…Aforementioned results are consistent with prior research which finds that millennials are particularly financially fragile when compared with earlier generations, as a result of struggling with high rates of housing and student loan debt, and an increasingly unstable labor market (West and Friedline, 2016). Our results also extend previous research which consistently documents that higher levels of educational attainment are related to lower rates of financial fragility (West and Mottola, 2016). The results also build on prior research which argues that the combination of lower earnings, lower savings, longer life spans and higher risk aversion when investing makes it challenging for women to become and remain financially independent throughout their lives (Fisher, 2010).…”

Examination of Black Men's Perceptions Of Personal Finance And Lived Experiences Developing Financial Literacy and Building Financial Capability Through The Lens of Institutional Racism

“…Financial fragility, the second major theme that emerged from this research is an outcome of being financially illiterate and disadvantaged due to a lack of financial resources and financial stability (West & Mottola, 2016). The participants of this study experienced financial fragility, as their families and communities were marginalized socioeconomically; thus reducing their capacity to create intergenerational transfers of financial assets.…”

“…Financial fragility is the lack of financial literacy and the inability to draw upon savings or other financial resources; thus, making a household vulnerable to non-banking hazards like payday loans (West & Mottola, 2016). The Payday loan is one of the highest cost forms of credit in the world costing borrowers a non-annualized rate of about 18% finance charge for two weeks until the next pay day (Skiba & Tobacman, 2009).…”

“…The combination of low or no financial literacy and lack of financial capabilities creates the condition of financial fragility. Poor minority households with lower incomes experience the highest rate of financial fragility (West & Mottola, 2016). The 2016 annual poverty wage at $24,000 per year is closer to the median household income of Blacks at $36,000 compared to the $60,000 for Whites (Economic Policy Institute, 2017).…”

“…The lower incomes and conditions of poverty that Black men faced within Black families (West & Mottola, 2016) were described in the literature without providing the context of institutional racism negative influences on these Black men financial capability. The participants in this study lacked financial literacy and did not experience intergenerational transfers of financial assets that could have bolstered their financial lives.…”