Americans' financial resilience during the pandemic

Abstract

How household wellbeing responds to pandemic-induced financial shocks likely depends on whether people undertake certain actions that enhance their ability to withstand adverse economic events, along with their ability to efficiently respond to the shocks when they occur. This paper examines Americans' financial robustness during the Covid-19 pandemic, using an index of financial resilience and a measure of financial fragility derived from household surveys of persons age 45-75 in spring of 2020, and in May-June 2021. We estimate the factors associated with resilience and fragility in both years, show how these two measures changed a year into the pandemic, and consider whether resilience in 2020 led to better outcomes in 2021. We conclude that higher initial levels of resilience were, in fact, associated with lower levels of financial fragility a year into the pandemic. These findings suggest that policies and programs that enhance financial resilience can help low and moderate-income households withstand economic shocks and be able to better address unexpected income needs.

How the pandemic altered Americans' debt burden and retirement readiness

“…To that end, Canilang et al (2020) analyzed data from the Survey of Households and Economic Decision Making of July 2020, and they concluded that such relief efforts helped provide a short-term safety net. Moreover, in line with our empirical findings, Clark and Mitchell (2022) found that their financial resilience index remained relatively stable from the beginning of the pandemic in 2020 to a year later in 2021, a result the authors attributed to the government's financial support programs including stimulus payments to low-and moderate-income households as well as higher unemployment benefits. Similar results were found by Asebedo et al (2020) who collected their own data during the onset of the pandemic and reported that the stimulus payments especially helped those with fewer financial resources, higher job insecurity, and more financial constraints through debt repayment.…”

Measuring financial resilience with consumer sentiment data from India

“…For example, Klapper and Lusardi (2020) find that about 55% of people in developed economies know how to handle their own money, but only 28% of adults in major developing economies do. Financially literate consumers have the ability to absorb any financial shock (Clark and Mitchell, 2022). An inevitable overlap in terms of financial literacy and financial capability usage as part of financial inclusion has been observed.…”

“…Clark and Mitchell (2022) investigate the impact of Covid-19 on Americans' financial stability and their crisis-management strategies. The Federal Reserve and government's efforts in the form of stimulus packages and direct benefit transfers have significantly contributed to the achievement of financial resilience, which is bolstered by financial literacy.…”

Household Financial Fragility During COVID-19: the Power of Financially Literate Women

“…Financial fragility is used to describe the individuals' and/or households' incapacity to cope with financial shocks and unexpected expenses (Clark & Mitchell, 2022). Ex-amples of such shocks is a decrease in working hours and salaries, job losses, changes in loan interest rates or stock markets and also physical disability, divorce, or death, (Ramli et al, 2022).…”