American Renters Suffer From Financial Fragility

By Patricia Uceda, Fall 2014 Graduate Research Assistant

fragileFinancial fragility is defined as “a lack of liquidity to deal with an unexpected expense.” Ideally, you should have money locked up in an emergency fund in case of unexpected expenses. Unexpected expenses are bound to happen, and can range from a car repair to a large medical bill or even being unable to work for a period of time. If you have two or three months of salary tucked away, you will be more able to deal with these unexpected expenses in an organized fashion, and may not have to take out a loan.

Unfortunately, the FINRA Investor Education Foundation’s National Financial Capability Study showed that 58% of renters indicated that they probably or definitely could not come up with $2,000 in 30 days in the event of an unexpected expense. In contrast, 29% of homeowners stated that they could. Additionally, 22% or renters have enough money to cover their expenses for three months, compared with 50% of homeowners. Having an emergency fund is essential to being financially stable. Click here for some tips from FINRA on how to get started on your emergency fund today.