Assessing the Short-Term Stability of Financial Well-Being in Low- and Moderate-Income Households

Sicong Sun, Washington University in St. Louis
Stephen P. Roll, Washington University in St. Louis
Olga Kondratjeva, Washington University in St. Louis
Sam Bufe, Washington University in St. Louis
Michal Grinstein-Weiss, Washington University in St. Louis


A growing body of research demonstrates that U.S. households experience a high degree of volatility in their finances. This volatility can take the form of large swings in month-to-month income, spells of unemployment, and incurring unexpected expenses. Beyond being difficult to predict, these income and expense shocks are costly as well, with one survey finding that the most expensive shock experienced by the median U.S. household cost roughly half of one month’s income.

This financial volatility disproportionately affects low- to moderate-income (LMI) households;3 a population that often lacks the resources to manage this volatility. For example, research from the Survey of Household Economics and Decisionmaking finds that roughly two-thirds of LMI households could not manage a modest $400 expense without taking out a loan they could not pay off immediately. This lack of a buffer against financial volatility is to some degree unsurprising, as the budgets of LMI households are largely taken up by essential expenses.