How Do Families Cope With Financial Shocks?

Stocksy

This brief is the first in a series of three that explore how financial shocks and emergency savings are related to families’ financial well-being. Savings may help households cope with unexpected expenses and preserve wealth over the long run. Understanding the frequency and impact of events that might strain budgets, and the resources families have to cope with them, is crucial to building policies that promote financial health.

Most households have a set of relatively fixed expenses that they expect to pay each month, and a financial shock—such as a car repair or a loss of income from fluctuating work hours or a pay cut—can make meeting those obligations much more difficult. Over the course of a year, households of all types are likely to experience  such shocks, which affect every aspect of family balance sheets—income, expenses, and wealth—and are at the center of American households’ struggle to achieve and maintain financial security.

This new issue brief examines the impact of financial shocks on families’ financial well-being and finds that, for many households, financial vulnerability is only one unexpected expense away.

Download the issue brief. (PDF)