COVID-19 has been a rollercoaster for many of us. The current crisis is a simultaneous assault on so many aspects of our lives — our health, how we work, how children go to school, how we recognize long standing racial inequities in our society, and multiple aspects of our financial lives.
Since June of 2020, Commonwealth has been conducting bi-weekly interviews with fifty-six households across the United States to identify how low- and moderate-income households manage their finances during a crisis. While many studies exist that ask the hypothetical question “what would you do if…”, Commonwealth’s Financial Resilience Project, made possible with support from BlackRock’s Emergency Savings Initiative, provides near real-time insights into what people are doing right now in the middle of a very real crisis.
Our webinar Financial Resiliency Strategies: How Lower Income Households are Weathering COVID, moderated by Melissa Gopnik, Senior Vice President at Commonwealth, featured research findings presented by Dr. Daryl Collins and a discussion with her and Jose Miranda Jr., Director of Economic Justice at Chhaya, on household financial volatility, the role of savings, and financial strategies households are using to manage this crisis. Panelists connected the findings to actions employers, financial institutions, fintechs, and policy makers can take to support low-and moderate-income households now and post-crisis.
1. People can’t achieve financial resilience on their own.
“We don’t think of financial resilience as a trait that you’re born with, or a virtue,” explained Melissa Gopnik. Financial resilience is a result of the financial tools that people have access to and that are designed to meet specific financial needs, wants, and aspirations. A greater level of financial resilience is a result of the actions employers, financial institutions, and policy makers choose to take.
2. A range of responses is needed to support low- and moderate-income households.
The financial impact of the current crises varies even among low- and moderate-income households – some households are seeing dramatic decreases in income, others are seeing stable income, and others are seeing increases in income. Further, longstanding systemic inequities in the financial system impact how households are able to respond. Melissa Gopnik pointed out that Black, Latinx, and women-led households were impacted most by COVID-19 and by the economic crisis. Jose Miranda Jr. pointed out that access to support such as PPP loans was not distributed equally, with immigrant-owned small businesses having a more difficult time accessing loans. Responses that build financial resilience need to account for the unique ways households have experienced the pandemic as well as what tools households need better access to.
3. Employers, financial institutions, fintechs, and government all have a role to play.
Commonwealth’s research underscored the importance of households having emergency savings to weather this financial crisis. Daryl Collins shared that of households that had emergency savings before the pandemic, only 8% have had to borrow to cover their expenses, compared to 31% of those without savings. Jose Miranda pointed out that employers can play this role, as “the place where you get paid is a great junction to start thinking about savings.” Financial institutions can support their clients across the income spectrum by waiving overdraft fees and leveraging their access to customer data to provide more personalized financial recommendations. Finally, government support is needed for households struggling to make ends meet. Jose Miranda recommended that the state and local government address housing insecurity and consider income replacement measures.
Our country is experiencing an unprecedented perfect storm of crises – health, economic, political, and social. These crises have shone a spotlight on many of the existing fault lines in our systems. By bringing attention to the stories of how low- and moderate-income households are weathering these crises, we can uncover new opportunities for action now to deal with the immediate struggles that people are experiencing but also how to fix these fault lines to prevent future harm.
To read more about Commonwealth’s research please visit their Financial Resilience Project web page where you can download the two briefs that they have already published. Each brief includes specific action steps that stakeholders—financial institutions, fintechs, employers, and government—can take.
BlackRock’s Emergency Savings Initiative
BlackRock announced a $50 million commitment to help millions of people living on low to moderate incomes gain access to and increase usage of proven savings strategies and tools – ultimately helping them establish an important safety net. The size and scale of the savings problem requires the knowledge and expertise of established industry experts that are recognized leaders in savings research and interventions on an individual and corporate level. Led by its Social Impact team, BlackRock is partnering with innovative industry experts Common Cents Lab, Commonwealth, and the Financial Health Network to give the initiative a comprehensive and multilayered approach to address the savings crisis. UPS, Uber, Mastercard, Etsy, Brightside, Arizona State University, and Acorns have joined BlackRock’s Emergency Savings Initiative to help their employees, customers, gig workers, and college students take the essential first step toward long-term financial well-being.