Emergency Savings Research Articles

Toward a Resident Personal Finance Curriculum: Quantifying Resident Financial Circumstances, Needs, and Interests.

IntroductionResident financial health has been linked to wellness and resiliency, yet financial literacy among residents is highly variable. While some medical school curricula include budgeting and student loan education, content on managing finances as a resident is usually lacking. We sought to quantitatively assess residents’ financial circumstances, needs, and interests to inform the design of a resident personal finance curriculum.MethodsSurveys were sent to residents in eight specialties at an academic medical center. Likert-type responses allowed respondents to rate their level of comfort (1 = Very Uncomfortable, 7 = Very Comfortable) and interest (1 = Very Uninterested, 7 = Very Interested) in various personal finance topics including budgeting, loan repayment, disability insurance, life insurance, home buying, and retirement planning. Details regarding financial circumstances, including assets, liabilities, and insurance, were also collected. Results of questions that utilized a Likert-type scale are reported as median (interquartile range).ResultsOf 346 residents surveyed, 144 (41.6%) responded. Residents were from Internal Medicine (56, 38.9%), Pediatrics (34, 23.6%), Emergency Medicine (18, 12.5%), and other specialties (36, 25.0%). Ninety-one (63.2%) reported educational loans, with an average balance of $191,730. Credit card balances exceeding $3,000 were reported by 11 (7.6%) respondents. One-hundred-two (70.1%) reported emergency savings, but only 65 (45.1%) reported having a retirement account (average balance $27,608). Respondents rated highest comfort levels with budgeting (5[4–6]), and lowest level of comfort with disability insurance (2[2–4]) and home buying (2[2–5]). Interest in learning each topic was high (6[5–7]), with retirement planning (6[5–7]), investing (6[5–7]), and home buying (6[5–7]) the topics of highest interest.ConclusionThese results highlight the deficits in personal finance literacy among residents. Future work should focus on development of a nationally scalable personal finance curriculum for residents.

The Rainy Day Earned Income Tax Credit: A Reform to Boost Financial Security by Helping Low-Wage Workers Build Emergency Savings

Financial stability depends on emergency savings. Low-wage workers regularly experience drops in income and unexpected expenses. Households with savings absorb these financial shocks but most low-income Americans lack rainy day savings. Therefore, even a small shock, like car repairs, can result in a cascade of events that throws a low-income family into poverty. Nonetheless, existing policies address emergency savings only indirectly. However, the Earned Income Tax Credit (EITC) already functions as an imperfect, makeshift savings tool. This lump sum refund at tax time gives workers a moment of financial slack, but many EITC recipients lack emergency reserves later in the year. By creating a “Rainy Day EITC” component of the existing EITC, policymakers can help low-wage workers build up emergency savings.

The State of Students’ Financial Literacy in Selected Slovak universities and its Relationship with Active Pension Savings

(ProQuest: ... denotes formulae omitted.)IntroductionFinancial literacy (FL) and its regulatory options are currently the subject of numerous professional and scientific discussions. Financially illiterates cannot fully participate in today's economy as such. It is important to develop students' skills in FL and strengthen the commitment of policy makers while introducing this topic into educational processes. In this context not only the demand increases particularly, but also the need for reliable data about FL among people worldwide. Such data can subsequently improve financial education strategies and implementation of financial education not only in schools. As a result of the impact of the economic and financial crisis accompanied with the process of demographic aging in all the economies of the world the question of the public pension systems' instability and threats to their sustainability is growing in importance (Rey-Ares et al., 2016). The shape of European age pyramid is transforming in consequence of higher life expectancy and consistently low birth rates what leads to a much older population structure. This unfavorable development is apparent in many European countries as well as in the United States. Between 2001 and 2016 the median age in Europe increased by 4.3 years, it means a rise from 38.3 years to 42.6 years (Eurostat, 2017). According to demographic projections by the Eurostat (2016) Slovak citizens will be aging among the fastest of all EU countries, whereas the average age of Slovak population increases by 4.6 years (12.1%) over the period of 20072025. The aging index is likely to exceed the limit of 100 before 2025. This means that the population of the post-productive age will be higher than the number of people in the preproductive age for the first time in history. The ratio of the elderly population to the working age population in Slovakia will be more than tripled (Rizman & Harvan, 2015; Eurostat, 2016). Public expenditures being rather sensitive to the phenomenon of population aging will increase significantly by 2060 and will have a negative impact on the general government balance. Pensions and healthcare will be particularly responsible for expenditure growth. To meet the challenges of this ageing population, especially after the recent economic and financial crisis, standard ages for retirement have increased, and occupational pensions have become less generous. As a consequence, a substantial part of risks and responsibilities for adequate standards of living after retirement has been shifted from governments and employers onto individuals and/or private households (OECD, 2013; Oehler & Werner, 2008; Prast & Soest, 2016; Lusardi, 2015a; Lusardi, 2015b). In this context, the results of the research by Babiarz & Robb (2014) pointed to the fact that households with greater financial knowledge and skills are more likely to be able to have emergency funds. The odds of having emergency savings could also increase with higher level of financial literacy. The research suggests the strong connectivity of FL with the accumulation of emergency savings which is a determining component of households' financial stability.1.Literature reviewIn many foreign studies approaches that prefer rationality and pragmatic point of views in relation to FL are dominate. Consequently, higher financial knowledge helps individuals to monitor an optimal consumption and balanced portfolio of household with relation to finances (Romitiy & Rossiz, 2014). They also lead to higher probability of savings' creation and correct financial planning for pension (Fernandez-Lopez et al., 2010; Hung et al., 2009). Relatively few EU adults save for old age and even those who save often have weak financial literacy (McGraw Hill Financial, 2015). The savings of individuals, especially students, must be adequate enough to cover longer retirement periods due to higher life expectancies (Lusardi, 2015a). …

Fragile Familiess Challenges for Emergency Fund Preparedness

Having an adequate emergency fund is a critical issue for a household’s ability to overcome financial trouble and thus overall financial wellness. Fragile families, which refer to unmarried parents and their children, are ill-prepared in emergency savings compared to an average family. This paper determines the challenges associated with having emergency funds for fragile families and concludes that having debt significantly reduces a family’s likelihood of maintaining an emergency fund and undermines the influence of an increase in income on emergency savings. The odds of having emergency fund are significantly higher in a higher income group than in a lower income group.

Do Tax-Time Savings Deposits Reduce Hardship Among Low-Income Filers? A Propensity Score Analysis

AbstractObjective: A lack of emergency savings renders low-income households vulnerable to material hardships resulting from unexpected expenses or loss of income. Having emergency savings helps these households respond to unexpected events, maintain consumption, and avoid high-cost credit products. Because many low-income households receive sizable federal tax refunds, tax time is an opportunity for these households to allocate a portion of refunds to savings. We hypothesized that low-income tax filers who deposit at least part of their tax refunds into a savings account will experience less material and health care hardship compared to non-depositors. Method: Using data from a household financial survey of a large-scale tax-time savings initiative, we examined the effects of saving tax refunds on material and health care hardship outcomes 6 months after filing taxes among a sample of low-income filers (n = 7,537). We used propensity score analysis to adjust for self-selection bias. Results: Six months a...

Financial Strain and Participation in the Supplemental Nutrition Assistance Program

ABSTRACTParticipation in the Supplemental Nutrition Assistance Program (SNAP) has increased over the past decade. Although poverty and sudden financial shock faced by households via unanticipated adverse events, such as sudden loss of income, are among major contributors, the findings of our study suggest that having an adequate stock of savings and financial assets might reduce the probability of household SNAP participation. Using data from the Panel Study of Income Dynamics, we tested whether a household’s emergency savings, asset poverty, and debt burden could predict SNAP participation separately from the effects of income and program participation. Results demonstrate that a household’s lack of emergency savings and asset inadequacy increased the probability of its SNAP participation. Implications for financial practitioners and policy makers are discussed.

THE ROLE OF INFORMATION ON RETIREMENT PLANNING: EVIDENCE FROM A FIELD STUDY

Many households neglect the pivotal task of planning for retirement. Proposals to stimulate employees to save for retirement in the workplace include tax subsidies, which are costly, and using automatic defaults, which may not complement the heterogeneous preferences of savers. This randomized field study shows that an information‐based intervention increases reported retirement plan participation, emergency savings, and using a budget. Employees offered access to education increased actual retirement deferrals by $26 per month. These results suggest that retirement education programs may be an effective strategy to increase retirement planning and saving behavior. (JEL J26, D14, D91)

A Population on the Brink: American Renters, Emergency Savings, and Financial Fragility

A Population on the Brink: American Renters, Emergency Savings, and Financial Fragility

Asset Building among Low Income Adults: An Exploratory Study with Participants in an Emergency Savings Program

Some of the most severe burdens of the Great Recession were shouldered by low income people who lacked emergency savings. The absence of assets in the form of emergency savings makes low income families particularly vulnerable in times of economic distress. Without savings to cushion unexpected financial emergencies, many families who were financially fragile before the recession fell into, or deeper into, poverty. In this article, we provide an overview of assets theory, review empirical evidence on saving, and discuss institutional arrangements in society that often aggravate poverty but that may offer opportunities to narrow the large and growing asset gap. Some innovative community-based organizations have recently developed programs to help people in low income communities build assets in the form of emergency savings. Unlike the now familiar Individual Development Account (IDA) programs that most often require earned income and offer dedicated savings accounts for long-term developmental purposes, emergency savings programs focus on the need for very low-income adults to build assets for future household emergencies. Such savings can be seen as a first step in asset building and toward increased economic sustainability. We describe one emergency savings program serving a diverse group of very low-income adults, and present findings from an exploratory qualitative study based on in-depth interviews with program participants. We end the article with implications for community practice, asset building policy, and future research.

A Fragile Balance: Emergency Savings and Liquid Resources for Low-Income Consumers

A Fragile Balance: Emergency Savings and Liquid Resources for Low-Income Consumers

Emergency Saving and Household Hardship

Households with limited income and wealth often struggle to access the financial liquidity needed to address unexpected expenses or income drops. Emergency savings can act as form of insurance against such economic shocks and reduce the risk of hardships that influence family wellbeing. Prior research has established that threshold amounts of liquid assets can reduce the risk of economic hardship. This study used a measure of self-reported emergency saving behavior to examine whether households who reported saving for emergencies were less likely to experience subsequent economic hardships in a longitudinal sample of households in disadvantaged neighborhoods from the Annie E. Casey Foundation’s Making Connections project. Results across a range of regression models suggest that households who saved for emergencies experienced slightly less overall hardship and were less likely to report several specific hardships, such as food insecurity and having a phone disconnected, three years later. This study supports the idea that small, unrestricted savings may play a protective role for low-income households.

Soft versus Hard Commitments: A Test on Savings Behaviors

Many Americans save too little, leaving them vulnerable to unexpected financial shocks. Finding ways to help Americans develop emergency savings funds could greatly improve welfare. A wealth of previous literature has demonstrated the central roles played by patience and self-control in achieving sufficient savings. When people lack patience or self-control, well-designed interventions may help improve financial stability. Increasingly, interventions intended to improve savings behavior have taken the form of externally restricted accounts such as ‘commitment accounts’ that include hefty fees for early withdrawal or that disallow withdrawals altogether for a pre-specified time. Yet, such hard commitment accounts may not appeal to impatient individuals, those who do not anticipate their own self-control problems, or to the poor for whom restrictions on scarce funds can be particularly painful. We test a new ‘soft’ commitment account that asks borrowers to think about their savings goals, how it would feel to achieve them, and make a pledge to work towards these goals (potentially increasing one’s intrinsic motivation), yet has no external restrictions on savings behavior. In a six-month randomized savings experiment we find that such soft commitments can significantly increase amounts saved on day one relative to either a hard commitment account (with external restrictions on withdrawals) or a traditional savings account. Additionally, the soft commitments significantly increased final savings balances relative to no form of commitment and were particularly effective for impatient individuals. However, despite the inherent illiquidity, the hard commitment account proved most effective in building savings balances amongst our participants at the end of six months.

Assessing the vulnerability of beach tourism and non-beach tourism to climate change: a case study from Jamaica

The Jamaican tourism industry is very climate sensitive, and, like most Caribbean islands, Jamaica's main tourism product is coastal, centered on “sun, sea and sand”. The island is susceptible to many risks posed by climate change, including sea level rise and extreme events, with resultant impacts such as beach erosion, flooding, saline intrusion into aquifers and general coastal degradation. This paper evaluates the relative vulnerability of beach versus non-beach tourism in Jamaica, using 43 pre-determined literature-linked indicators. These comprise bio-geophysical, social, technological, economical, technological and institutional factors. Four case areas are assessed using multi-criteria decision analysis to derive vulnerability scores for each area. The study finds that non-beach tourism operations should not be automatically perceived as less vulnerable than beach-based operations. Sustainable adaptation options are complex and numerous, and overall beach tourism businesses have better insurance, emergency savings, disaster plans and backup power facilities, among others. They also have the advantage of being in business longer than the inland resorts, a firmer business structure and an extensive marketing budget. In the long term, better adaptation and planning by inland businesses could change this balance.

The benefits of saving at tax time: Evidence from the $aveNYC evaluation

Paper presents results of an evaluation of a tax-time savings program. $aveNYC offers incentivized savings accounts to taxpayers filing their taxes at Volunteer Income Tax Assistance (VITA) sites in New York City. Participants who direct-deposited at least $200 of their refund into the account and maintained the balance for a year received 50 cents per dollar saved. A comparison group was drawn from NYC VITA sites where the program was not offered. Propensity score weighting was used to balance the two groups. Study participants (N=353) were surveyed via telephone halfway through the program, and again 8 months after the program ended. 70 percent of $aveNYC participants surveyed received the match. The majority of those who received the match continued to save some portion of the money. At the second survey, there was no significant difference between groups in savings amount; this finding may be due to measurement limitations. $aveNYC participants were less likely than comparison group members to have skipped paying bills or taken out a loan during the study period, and were more likely to have withdrawn money from savings. Findings suggest that tax-time savings programs can result in sustained emergency savings and prevent reliance on borrowing and unpaid bills.

Determinants of Adequate Emergency Funds Including the Effects of Seeking Professional Advice and Industry Affiliation

This research examined the effects of seeking professional financial advice and being employed in different industries on a household’s likelihood of holding adequate emergency funds to cover six or more months without income. The theory of precautionary savings provided a conceptual framework for the study. Three measures of emergency funds were analyzed: Subjective funds, Quick funds, and Comprehensive funds. The sample consisted of working household heads in the 2007 Survey of Consumer Finances. Seeking professional financial advice significantly increased the likelihood of holding adequate Comprehensive funds. Only household heads employed in financial, insurance, real estate, repair, and advertising industries were more likely to have adequate levels of Subjective and Comprehensive funds. Household heads employed in manufacturing, construction, and retail industries, which are more likely to be affected by a recession, did not have increased likelihood of holding adequate emergency funds. Financial educators and advisors need to stress the importance of adequate emergency savings.

The deprivation approach and the attainment of human rights: evidence for Australia

Conventional poverty studies adopt an income framework, in which poverty is defined as a lack of income (relative to need) and measured using an income poverty line. However, acknowledgment of the limitations of the income-based framework has resulted in alternative approaches to the conception and measurement of poverty designed to capture its multidimensional nature in ways that reflect the experience of going without, or deprivation. The deprivation approach identifies specific instances where people are denied access to items regarded as essential by a majority of the community in which they are living because of a lack of resources. This study uses the deprivation approach to illustrate how poverty can undermine the attainment of those human rights identified as important in Art 25 of the Universal Declaration of Human Rights (UDHR). Using the results from a recent social survey, we show that many of those forms of deprivation referred to in the UDHR exist among Australians in general and among those groups most disadvantaged. The results show that many sole-parent families, the unemployed and Indigenous Australians are experiencing deprivation in several of the standard of living dimensions referred to in Art 25, including those relating to the most basic needs for food, warmth, emergency savings, insurance protection and social interaction.