National Endowment for Financial Education | April 2018
Summary: The capacity to cope with unexpected expenses is a crucial component of financial wellbeing. The lack of such preparedness is like balancing on a beam—a shock or unexpected financial adversity can immediately shake one off and it is hard to regain footing. Lusardi et al. (2011) introduced an innovative measure of the capacity to cope with shocks, which they termed financial fragility, by assessing U.S. households’ capacity to come up with $2,000 in 30 days. In the aftermath of the financial crisis of 2007–09, they found that almost 50% of the U.S. population could be classified as financially fragile. Using the same measure to analyze data collected in 2015, we find that financial fragility still affects more than one-third of the population. Such high incidence of fragility is concerning when we juxtapose the crisis,which occurred nearly ten years ago, with an economy that has been recovering steadily.
To read the National Endowment for Financial Education’s Summer 2018 Digest, which features GFLEC’s research on financial fragility as its covers story, click here. This research was supported by NEFE.