Household financial emergencies pose one such challenge. Recent scholarship suggests that LMI households experience income and/or expense volatility on a fairly regular basis, and turn to their resources to make ends meet, such as family, friends and short-term credit (Hannagan & Morduch, 2016). Financial inclusion, including savings in bank accounts and credit options, holds the promise of providing resources for maintaining financial well-being during times of financial stress.
This symposium will provide empirical evidence about financial inclusion during household financial emergencies, as well as provide discussion about ways to improve financial inclusion through policy efforts. The first paper, The Front Lines of Financial Defense: Managing Financial Emergencies in Low-Income Households, uses administrative tax and survey data from LMI tax filers to examine which resources (e.g., friends and family, checking or savings accounts, payday loans, etc.) they would use to cope with an unexpected financial emergency, and the order in which they would use these resources. Results suggest that fewer than half of these households could rely on mainstream financial resources like bank accounts, cash, or credit cards in a financial emergency. The second paper, Does Financial Access Mitigate the Effects of Income Volatility on Credit Record? examines the degree to which financial inclusion provides resources for maintaining financial well-being during times of financial stress. Using a broad measurement of financial inclusion, the authors examine whether financial inclusion mediates the effects of intrayear negative income volatility on self-assessed credit report status. Finding suggest that financial inclusion does not provide mediation effect between income volatility and credit record status, and thus does not appear to buffer against financial hardship for households experiencing intrayear income drops. Households may need changes to financial inclusion to fully realize the potential mitigation effect during financial crises. The third paper explores one such policy idea – postal banking. In Financial Capability and Asset Building for All: The Potential of Postal Banking for Under-served Low-Income, Minority, and Rural Communities, the authors use empirical data from the US Geological Survey, Federal Deposit Insurance Corporation, National Credit Union Association, and Esri Business Analyst to explore geo-spatial variation in population-adjusted densities of banks, AFS providers, and post offices in the US to assess the potential role postal banking might play as a strategy to address the challenge of financial inclusion. Results suggest residents living in rural zip codes and in zip codes with higher proportions of residents who are living in poverty, are African-American, or are Latino have less access to banks or credit unions and might benefit from accessing financial services through post offices.