Financial literacy, wellness and resilience among African Americans: Financial resilience

New insights from the Personal Finance (P-Fin) Index

Financial resilience is the ability to cope with an unexpected financial shock. Financial fragility is the inability to do so. 2019 P-Fin Index data, collected at a time of continued economic expansion prior to the onset of COVID-19, demonstrates how ill-positioned many Americans, including African Americans, were to face the economic consequences—furloughs or job loss, salary reductions, investment losses and unexpected expenses-of the pandemic. 

Only about one in two U.S. adults were certain that they could cope with a midsized unexpected expense in the near term. More specifically, 53% reported that they could certainly come up with $2,000 within the next month to cover an unexpected expense (Figure 8). Twenty-six percent reported that they certainly could not or probably could not do so, i.e., they are financially fragile. The percentage of adults that are financially fragile has been consistent over the four years to date of the P-Fin Index-27% in 2017, 26% in 2018, 26% in 2019, and 27% in 2020—indicating that the issue is deeply rooted and financial resilience is a challenge for many even in good economic times. 

African American P-Fin Index Figure 8
Source: TIAA Institute-GFLEC Personal Finance Index (2019).

There was a significant gap in financial resilience between African Americans and whites prior to COVID-19. Only 35% of African Americans were certain that they could cover a $2,000 emergency expense within a month compared with 59% of whites (Figure 9). While financial fragility is prevalent among a broad cross-section of African Americans, those vulnerable are most likely to be women, the young, and those with lower incomes and less education (Figures 10 and 11):  

  • 45% of African American women are financially fragile, compared to 33% of men. 

  • Almost 50% of 18- to 29-year-old African Americans are financially fragile; this figure drops to 34% among those age 60 and older.

  • Financial fragility is highest among African Americans with low income; nonetheless, approximately 40% of middle-income individuals are financially fragile. 

  • On average, 65% of those without a high school degree are financially fragile, compared to only 17% of those who have at least a bachelor's degree. 

African American P-Fin Index Figure 8
Source: TIAA Institute-GFLEC Personal Finance Index (2019).
African American P-Fin Index Figure 10
Source: TIAA Institute-GFLEC Personal Finance Index (2019).
African American P-Fin Index Figure 11
Source: TIAA Institute-GFLEC Personal Finance Index (2019).

In addition, individuals vulnerable to a current financial shock may also be more financially vulnerable in the long term. Among financially fragile African American non retirees, only 17% have tried to determine how much they need to save for retirement. In contrast, 37% of non-retirees who are not financially fragile have planned for retirement (Figure 12).

African American P-Fin Index Figure 10
Source: TIAA Institute-GFLEC Personal Finance Index (2019).