National Consumers League

Being Financially Fragile in America

By NCL Public Policy intern Melissa Cuddington

Nearly 36% of working Americans could not cover an unexpected $2,000 expense within 30 days. According to a survey done by the 2015 National Financial Capability Study (NFCS), working adults (ages 25 – 60) who answered “probably not” or “certainly could not” to the question of whether they could come up with $2,000 in 30 days, are considered “financially fragile” consumers.

The 2015 Survey for Household Economics and Decisionmaking (SHED) also revealed that 41% of respondents are considered financially fragile when faced with an emergency expense of $400. 41% of those surveyed stated they would have to charge this unexpected expense to a credit card or use money from a savings account.

These statistics are somewhat shocking when considering that during the Great Recession, nearly 50% of working adults were considered financially fragile. This number is not significantly more than the 36% of working adults who are financially fragile today.

There are a few facts from the survey that are worthwhile to mention when looking at the most susceptible demographics to financial fragility.  

Who is Financially Fragile?

  • Women (42%) are significantly more likely to be fragile than men (29%)
  • Financial fragility decrease steadily with increasing income
  • Financial fragility is nearly equally distributed across age groups, although fragility is slightly higher in the middle age group of 40- to 49-year-olds

According to a NEFE Digest article, there are a number of factors that can cause financial fragility. The first and foremost is a lack of assets. A lack of assets can be seen in a multitude of areas, such as low borrowing capacity on credit cards, inadequate health insurance, renting a house instead of owning and lack of access to traditional bank accounts. The second factor that can cause financial fragility is debt, including medical, education and credit card debt. Many of these issues can be addressed with a higher level of individual financial literacy.

The NCL is especially interested in this widespread issue of financial fragility in the U.S., because of the role it plays as a possible solution. We agree with NEFE Digest on the argument that financial literacy lowers the likelihood that individuals will be financially fragile. NEFE Digest states that better financial literacy lowers one’s likelihood to be financially fragile–regardless of age or income.

Financially literate consumers bolster the overall health of the economy. This is why programs, such as LifeSmarts, that educate the youth on issues relating to their environment, health and safety, personal finance, technology and their rights as consumers, are so important. Financial literacy should be prioritized when educating young consumers and adults about money management.