Can Lack of Emergency Savings Lead to Mortgage Problems?

The following post comes from the America Saves Blog. Follow them on Twitter and Facebook.

By Katie Bryan
America Saves Communications Manager

The FINRA Investor Education Foundation recently released a new study revealing that households without emergency savings are more likely to experience mortgage payment problems when faced with an income shock. Households without emergency savings, or rainy day funds, were three times more likely than households with emergency savings to make a late mortgage payment—and almost twice as likely to be involved in a foreclosure. These differences exist even after controlling for other factors that can impact mortgage payment behavior—like income, education and geographic region.

 

The study also found that minorities and households with dependent children are more vulnerable to income shocks. Among households that experienced an income shock:

o Minorities were 52 percent more likely to make late mortgage payments relative to non-minorities; and
o Dependents in the household increased the likelihood of late mortgage payments by 48 percent.

The FINRA Foundation's new study shows the extent to which lower-income Americans were especially unable to withstand an income shock during the Great Recession. Among households experiencing an income shock, those with incomes below $50,000 were 43 percent more likely to make late mortgage payments relative to their more affluent counterparts.

Don’t have an Emergency Fund? Here are three resources to help you start saving:

Emergency Savings: Why you should start saving for emergencies

Five Saving Strategies

Saving on a Tight Budget

The FINRA Investor Education Foundation is the largest foundation in the United States dedicated to investor education. Its mission is to provide investors with high-quality, easily accessible information and tools to better understand the markets and the basic principles of saving and investing.

Tip of the Day

  • Written by Guest Blogger | March 25, 2014

    #Save #money monthly through an automatic transfer from checking to savings using #myPay http://ow.ly/sGUX0   

Saver Stories View all »

Building a Six-Figure Savings While Enjoying Life

Written by Jackie Toops | November 13, 2020

Does the idea of saving up hundreds of thousands of dollars seem impossible? How about doing it while still living an enjoyable lifestyle?

For military spouse Martina and her husband, an E-5 in the Navy, accumulating a six-figure savings has become a reality. One might think that in order to save this much, it would take a great deal of sacrificing and forgoing a certain quality of life, but Martina and her husband would disagree. “Over the past few years (about five), we've managed to save almost $120,000 while mostly living on one income. We've learned so much about easy ways to save money and live a good life,” shares Martina.

Read more...

How Smart Financial Decisions Can Create Opportunities 

Written by | November 22, 2019

Written by Stephen Ross, America Saves Program Coordinator | November 22, 2019

Of the many stories Military Saves shares, most describe how someone was in dire straits financially and worked their way out of it with the help of Military Saves. This time we want to highlight a different kind of story. This is a story about how responsible financial decisions can build on one another to create opportunities you thought only the super-rich enjoy.

Read more...

Involving Kids in Family Finances

Written by | April 19, 2019

 

One of the best lessons we can share with our kids is about money. By middle school, kids should have a good understanding of how money works as well as the importance of saving.

Read more...