Research funded by the National Endowment for Financial Education® (NEFE®), and conducted by the Global Financial Literacy Excellence Center at the George Washington University, identifies a widespread problem affecting millions of Americans. The recent study finds one in three Americans are financially fragile, meaning they are unable to cope with emergency expenses in a short timeframe. Using survey data and focus group discussion findings, researchers assessed responses focused on financial preparedness—specifically respondents’ confidence that they could come up with $2,000 within a month’s time if needed for an emergency. Individuals answering that they certainly could not or probably not come up with that amount of money in that timeframe are considered financially fragile. The analysis found that one in three (36 percent) respondents in the 2015 National Financial Capability Study (NFCS) fall within this vulnerable group.

What causes financial fragility? Researchers investigated the causes of financial fragility and found three main factors: high debt, lack of assets, and low financial literacy. “Financial fragility does not mean simply lack of precautionary savings,” says Annamaria Lusardi, Ph.D., academic director of GFLEC. “Both sides of households’ balance sheet matter; heavy indebtedness can also make individuals financially fragile.”

Higher income does not always protect against financial fragility. Not surprisingly, the majority of financially fragile people are in the low-income bracket. Yet almost 30 percent of middle-income households (annual income in the $50–75k range) and 20 percent of high-income households (annual income $75–100k) also are considered financially fragile.

Education and gender decrease fragility risk. The higher the education level, the lower the probability of being financially fragile. Also at risk are women, a substantially higher proportion of working-age women are financially fragile relative to men. “Financial fragility is a multifaceted problem facing a wide representation of the American population,” says Hensley. “We urge everyone to consider the unique factors in their life and prioritize their finances accordingly to work toward long-term financial goals.”

For more information, visit www.gflec.org or www.nefe.org.