Financial Fragility and Its Relationship to Housing Instability in a Sample of Single Mothers

Background and Purpose: Many single mothers struggle to make ends meet, and often do not have liquid assets set aside to draw on in the case of an unexpected emergency or drop in income. This experience of financial fragility may place single mothers and their children at risk of falling deeper into poverty, as the inability to recover quickly from an economic shock may lead to future financial hardship.  To date, few studies have traced the outcomes of financial fragility, and none have focused exclusively on the financial fragility of single mothers—a population frequently served by the profession. The purpose of this research is to first describe banking status, an indicator of financial inclusion, and amount liquid asset holding, an indicator of financial fragility among single mothers.  Second, the purpose of this research is to determine if financially fragility is associated with housing instability.

Methods: This study used panel data from the 2008 Survey of Income and Program Participation (SIPP), which contains data on a multitude of social and economic measures including liquid and illiquid asset holdings, measures of material hardship, and housing variables for a representative sample of 52,031 eligible U.S. households.  Binary logistic regression was used to determine if financial fragility, operationalized as not having savings equal to three months of income, was associated with missing a rent or mortgage payment, being evicted, or doubling up in a final sample of 2,188 single mothers.

Results:  Despite relatively moderate monthly income (median=$2,184), many single mothers were financially excluded. Only 50% of the sample reported owning a checking account and 38% reported owning a savings account. Single mothers reported high rates of financial fragility, with 91% not having savings equal to three months of income. The median amount of liquid assets was $0 (Mean=$2,328) for the sample. Financial inclusion and financial fragility were significantly related to housing instability. For instance, compared to those who were not financially fragile, single mothers who were financially fragile were 105% more likely to miss a rent or mortgage payment, but were no more likely to be evicted or to have friends or family move in to help cover housing expenses. 

Implications and Conclusions: Single mothers appear to be excluded from the financial mainstream, as indicated by their low rates of checking and savings account ownership and financially fragile, as indicted by little to no savings set aside to sustain and recover from an economic shock. Without savings to fall back on, single mothers faced with an unforeseen emergency may have to choose between paying rent or mortgage, or covering other bills and everyday expenses. Policy that expands financial inclusion through access to safe, affordable financial products may be one way to help single mothers move toward financial security. Additionally, programs that promote saving at tax time or provide matching incentives for savings deposits may help lower-income single mothers put away savings for future emergencies.