June 7, 2011 — In Virginia and across the nation, many households are economically fragile, according to demographers at the University of Virginia's Weldon Cooper Center for Public Service.
The demographers analyzed data recently released to the public from the Financial Industry Regulatory Authority Foundation's Financial Capability Study. Certain household characteristics – younger age, lower income and having dependent children – are associated with decreased economic security, while other characteristics – being white, having a bachelor's degree or higher and being married – are associated with increased economic security.
In Virginia, data show that:
• Many households struggle to make ends meet. Twenty-two percent of Virginia households spend more than they earn to meet regular monthly bill payments, and 56 percent say it is difficult to cover expenses and pay all bills.
• More than one-third of households saw large, unexpected income drops between 2008 and 2009. Households already struggling to make ends meet were more likely to report income losses.
• Sixty percent of households do not have sufficient assets to buffer their income shortfalls. They lack an emergency fund that would cover three months or more of expenses.
This analysis builds on earlier work by Cooper Center demographers, in which they identified threats to Virginia households' economic security. The previous report, "Building Economic Security for Virginia Families: Income and Asset Adequacy," released in February, was based on the most recent American Community Survey and Survey of Consumer Finance data.
"In the face of increased financial expenditures and decreased income, households may turn to higher-cost, short-term loans from alternative financial service providers such as payday lenders, pawn shops and auto title lenders to make ends meet. Use of these financial products may exacerbate a household's already challenging financial situation," said Rebecca Tippett, author of a forthcoming study, "Undermining Economic Security: Use of Alternative Financial Services in Virginia."
In this study, to be released June 14, Cooper Center demographers will examine what alternative financial services are, why people use them, who uses them and where they are in Virginia.