Does Owning a Home Mean You’re Financially Stable?

FINRA study finds renters struggle more with finance, but that’s not entirely unexpected.

Financial literacy leads to success

A new study by the FINRA Investor Education foundation, titled American Renters and Financial Fragility, reports some startling numbers when it comes to property renters lagging behind owners on their ability to achieve financial stability. Still, while the numbers are striking, they present a picture that’s not entirely unexpected.

According to the study:

  • 24 percent of renters say it’s difficult to cover their bills each month (versus 12 percent of homeowners).
  • 58 percent reported they wouldn’t be able to generate $2,000 in cash flow within 30 days if they had an emergency expense (versus 29 percent of owners).
  • 78 percent have no rainy day fund (versus 50 percent of homeowners).
  • 72 percent failed a simple 5-question financial literacy test (versus 55 percent of owners).

FINRA Foundation President Gerri Walsh admits this “paints a trouble portrait of renters in the United States.”

On the other hand, Consolidated Credit President Gary Herman points out the result shouldn’t be all that surprising. “By and large, homeowners have the ability to own because they’ve achieved the level of financial stability necessary to do so. For many people, once stability is achieved, homeownership is the next logical step towards reaching the American Dream.”

What’s more concerning to Herman is how consumers – regardless of ownership status – seem to be lacking basic financial knowledge.

“The numbers show about three out of four renters can’t pass a basic financial literacy test, but it’s just as concerning to me – if not more so – is that more than half of homeowners can’t pass either,” Herman points out. “That shows just how far behind we all are when it comes to financial literacy.”

What is financial literacy and why do you need it

“Financial literacy” is the term used to describe your ability to understand basic financial concepts. So when people use terms like “annual percentage rate” or “debt consolidation” you know what those terms mean and how they apply to your daily financial outlook. Basically, if you aren’t financially literate, you’re often guessing about what to do for your finances instead of making educated choices.

The problem, of course, is that guessing leaves plenty of room for mistakes to be made. As a result, you’re more at risk of facing financial distress, including things like bankruptcy and foreclosure. In addition, once you get into trouble, it can be harder to get out since you won’t understand basic options for relief and how they each word.

With that in mind, the more you build your financial literacy, the easier it will be to make the right choices and overcome challenges when they arise. With that in mind, Consolidated Credit offers free Financial Literacy Education resources to help build your knowledge. If you have questions, just give us a call at 1-888-294-3130. We can help you understand where you are and give you the right tools to help you get where you need to be.

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April Lewis-Parks
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