The Pandemic’s Impact on Financial Insecurity in the US
Households Face Financial Strain
The COVID-19 pandemic has created financial difficulties for millions of households. Even before COVID-19 struck, consumers were struggling with financial insecurity. Heading into the pandemic roughly one third of American households were not able to handle an unexpected $2,000 bill, while slightly more than one third found it hard to cover their monthly expenses.
Even in times when the economy was expanding and unemployment was low like in 2018, one in three Americans didn’t have the money to cover a $2,000 financial shock and/or were struggling with heavy debt. Since the pandemic, this has become worse for certain populations. These are just some of the findings from the FINRA Foundation’s Financial Resilience in America study, which was conducted just before the pandemic’s onset.
Women and Minorities at Most Risk
The study found that women and minorities were the most at risk for financial insecurity. Individuals who hold a bachelor’s degree tend to fare better than their counterparts without one, but not by a longshot. The study found 19.9% of Americans without a college degree struggle to make ends meet compared to 16.2% of those who are college-educated.
That is not to say college-educated people did not have their own problems. People with a bachelor’s degree had a much higher debt load due to student loans. The debt-to-income ratio for educated Americans stood at 130% compared to 82% for those without a bachelor’s degree.
Student Debt Weighs on Finances
For people in their 30s and 40s, the biggest financial insecurities tend to be centered around debt, including student loans, child-care costs, and home mortgages. As a result the debt-to-income ratio is around 136% for that age group. That compares to 82% for those under 30 and over 60. Among the 30- and 40-year-olds, 24% cannot meet all their expenses in a normal month and 56% found it difficult to meet their monthly financial obligations.
Taken altogether, the study underscores the fact that a lot of Americans were already in difficult financial situations heading into the pandemic and many are now worse off. The pandemic is still impacting the economy and causing financial difficulties for Americans. However, the Federal Reserve has recently said that the economy is making progress toward recovery, despite the Delta variant of COVID-19.
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