The Financial Industry Regulatory Authority (FINRA) released the results from a study that looked at financial resilience in American households. Researchers from the FINRA Foundation and Fairleigh Dickinson University surveyed data from more than 27,000 homes and found that approximately four in ten American households lacked financial resilience, while fewer than two in ten households demonstrated economic resiliency. Let’s take a look at some factors that the researchers identified as contributing to financial stability.
Four Groups of Financial Resiliency
The researchers identified four segments of financial resiliency: Living on the Edge, Paycheck to Paycheck, Holding Steady, and Standing Strong. From there, they explored specific characteristics of each segment, such as the level of debt, savings amount, homeownership, and other factors. Respondents categorized as Living on the Edge—the highest segment, at 37 percent—are the least financially resilient, while those in the Holding Steady and Standing Strong categories tended to be the most resilient.
Indicators of Financial Resilience
Researchers found clear markers of financial resilience by examining the habits of respondents in the Holding Steady and Standing Strong categories. Respondents in these categories had low levels of debt, had retirement and emergency savings, tended to own their homes, had health insurance, and were less prone to income volatility. Surprisingly, 100 percent of respondents categorized as Standing Strong demonstrated high financial literacy, while only 28 percent of respondents in the Holding Steady segment did. Overall, American households with stable jobs, little to no debt, and health insurance tend to weather financial turbulence more successfully than those who lack these traits.
Breaking Down the Demographic Data
According to the study’s findings, respondents in the categories with the lowest financial resilience (Living on the Edge and Paycheck to Paycheck) were predominantly young, female, and without a college degree. Additionally, the least financially resilient category was the most diverse group of respondents, indicating that minority groups are more likely to experience low financial resilience. The study’s authors stated that white respondents are 58 percent more likely to be in the highest economic resilience segment than the lowest. Additionally, those in the Living on the Edge category reported the highest levels of financial anxiety, and they were more likely to suffer from medical debt.
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