Household financial resilience is an important indicator of how an economy will respond to shocks. And while greater resilience can be a byproduct of greater wealth, it can also come as a result of consistently applying good money habits in the pursuit of financial goals.
The economy is a massive, dynamic system of actors interacting and making decisions at a local level. However, the details of these individual events can get lost, because we measure the totality of this activity through large aggregate measures such as total consumer spending, a component of GDP. Still, the individuals and households making up our economy have unique features that contribute to the full story of our economy.
Financial resilience provides a comprehensive way of thinking about household finances across the economy. Resilience at a household level supports a resilient economy, while more fragile households constitute a more fragile economy. By understanding and monitoring the components of financial resilience, we can better understand how economic shocks might reverberate across the country. And this understanding can help drive policy and financial products designed to nudge consumers toward greater economic stability.
Defining resilience
Financial resilience is the ability to withstand economic and financial shocks, and emerge relatively unscathed. These shocks can be external, such as a period of high inflation, or very direct and personal, such as a job loss or unexpected medical bills. These are the things you generally don’t see coming. For financially fragile households, disruptions can spell disaster and lead to a high interest debt spiral, missed financial goals and even poor physical and mental health outcomes. But resilient households can manage these uncomfortable times and lose little ground.
A household’s ability to withstand shocks involves several components, some behavioral and some resource-based. They include: financial literacy, general money management skills, access to emergency savings, access to financial products such as bank accounts and credit, manageable debt levels and retirement preparation. These components can work holistically, each feeding into the others to create an upward cycle of financial well-being.
Outcomes associated with greater resilience
Greater financial resilience means less household fragility and better overall well-being. People with markers of financial resilience — such as access to emergency savings — are more likely to describe feelings about their current financial situation in positive terms, according to a recent NerdWallet survey, conducted online in September by The Harris Poll. Building resilience necessarily means having greater financial insulation as well as developing better borrowing habits and making savvier risk management decisions. [0] Further, higher levels of resilience are associated with lower financial stress, which can impact mental and physical health outcomes. [0] [0]
The COVID-19 pandemic, for example, was a huge and unexpected economic shock with far-reaching effects, and it provided an opportunity for researchers to look closely at the role of resiliency in household outcomes. Consistently, the markers of resilience resulted in greater financial satisfaction and less financial stress. [0] Households with greater features of resiliency were less negatively impacted by the economic effects of the pandemic and were less likely to be fragile one year later — this during and immediately after one of the deepest and most dramatic recessions in U.S. history. [0]
Connection to the macroeconomy
When households across the economy are able to withstand a shock, collectively, it can mean the difference between an economic slump and sustained strength.
The COVID-19 pandemic provides evidence of this connection well. The pandemic was felt globally, but the economic impact was disparate. More so than other large economies, the United States’ economic recovery from the initial recession was robust. [0] Consumer spending and investing are largely credited with this economic strength against the odds. And this spending and investing was supported largely by fiscal policy, including stimulus payments, enhanced unemployment benefits, debt forbearance programs and more. In essence, the U.S. response allowed households to build temporary resilience.
The cost of this resilience was steep, and contributed to a booming national deficit and a period of high inflation. But the benefits are difficult to deny. Compared with other advanced economies, the United States quickly recovered to the pre-pandemic GDP trend, driven primarily by sustained consumer spending and investment. [0]
Resilience today
Now, late in 2025, household financial resilience has declined relative to the immediate aftermath of the COVID-19 pandemic, and is likely still on a downward trajectory, increasing vulnerabilities during a period of economic uncertainty.
A 2024 FINRA report on well-being shows declines in several measures related to financial well-being and resilience relative to 2021. [0] Debt balances that were paid down during 2020-2021 have once again climbed, household savings has been spent down, and those who don’t have assets such as real estate and investments are more financially fragile now than they were those few years ago. [0] [0]
Current economic risks include a cooling labor market, inflationary pressures from trade policy and general uncertainty as economic policies and their potential outcomes are frequently changing. Households today are far less equipped to handle an economic downturn or swiftly rising prices.
Where Americans stand on measures of resilience
Financial resilience is dynamic; it changes throughout our lives as we progress in our careers and life stages.
Some of the components of financial resilience are a byproduct of earning more and getting older — income and age are related to greater self-reporting of resilience and resiliency traits. But self-reported resilience is also higher among those who report some of the behaviors associated with greater measured resilience — such as having savings on-hand, checking on retirement progress and tracking spending.
Seven in 10 Americans (70%) report that they are financially resilient, according to the NerdWallet survey. And feeling good enough to withstand economic shocks is a good start. But when you break down the components of resilience, potential areas for improvement become obvious.
Financial literacy
Financial literacy refers to understanding basic concepts of personal finance. And while knowing about compound interest, for example, may not help if you don’t have enough income to save, it does set you up for making savvy decisions when conditions allow.
Greater financial literacy is associated with greater financial well-being and impacts the decisions you make in managing your money, including risk-taking behaviors such as investment choices and debt management. [0] [0]
Researchers have generally settled on a basic set of questions known as the “Big Three,” covering inflation, risk and interest to track financial literacy across groups and over time. [0] Across variations of those standard questions, young adults have some of the lowest financial literacy scores. Also, men are more likely to score highly on financial literacy than women (though this gap appears to be closing). [0] And white Americans are more likely to score highly than Black and Hispanic Americans, all underscoring the correlation between historically disadvantaged populations and financial fragility. [0]
FINRA, an investor protection nonprofit, has been measuring financial literacy for years and expanded their evaluation beyond the big three. [0] They’ve found the share of Americans answering several of the individual questions correctly — including questions on risk, interest rates and mortgages — has fallen since the 2009 survey period. However, correct responses to one question, about inflation, rose from 2021 to 2024, indicating direct experience with a financial concept is likely to garner hard lessons.
Emergency savings
Having cash on hand is the first line of defense when you’re hit with a financial shock. Cash to cover unexpected bills can save you from taking on debt, and savings to cover living expenses can temporarily cover large costs, such as housing payments, in case of income loss. Savings also acts as an effective buffer from financial stress, leading to greater productivity and well-being. [0] Among the facets of financial resilience we examined in the survey, emergency savings were highly correlated with positive sentiment and confident financial management.
Unfortunately, fewer than half of Americans have notable emergency savings — 46% have access to a rainy day fund, which we defined as at least $2,000 in cash (i.e., readily accessible money) available for emergencies such as home or car repairs, according to the NerdWallet survey. And 44% have enough money in savings to cover at least 3 months of living expenses in case of income loss or other emergency.
In addition to being more likely to feel generally positive about their financial situation than those without such funds, people with access to emergency funds are more likely to be confident in their ability to manage their finances.
Access to financial products
Households with access to credit can smooth their consumption throughout the month and year, leading to fewer periods of feast or famine. They can also more easily build wealth through assets like real estate and investments. And when economic shocks hit, they have multiple sources of potential relief, beyond their available savings.
Banks and similar institutions are the foundational level of credit and financial product access. The share of unbanked households has been falling over the past several years, from 7.6% in 2009 to 4.2% in 2023, according to the FDIC. [0]
While being “banked” is associated with better financial outcomes, having a single account may not be enough. Research in the Journal of Social and Economic Development found the effects of having a single bank account and having no bank account as both negative on financial resilience, whereas having several is related to increased resilience. [0]
A similar relationship is seen with high financial product holdings, such as credit cards, where more financial products are associated with greater resilience. [0] The 2023 FDIC survey found that about 15.7% of American households had no mainstream credit, a statistic that was much higher (78.4%) among unbanked households.
More than half (55%) of Americans have one or more credit cards, and 45% of Americans have two or more bank accounts, according to the NerdWallet survey. These features are more common among higher income households, homeowners, older generations and those with access to emergency funds.*
Manageable debt
Access to credit can build financial resilience, but when your debt becomes too much to handle, it can weaken your financial situation. High debt levels can prevent you from saving for emergencies and reduce your available credit for use when shocks occur. Further, when shocks impact your available cash flow, you may not be able to keep up with high debt payments.
Roughly two-thirds (65%) of Americans agree their current debt load is manageable, according to the NerdWallet survey, but the Quarterly Report on Household Debt and Credit report from the NY Fed finds that balances across debt types have exceeded pre-pandemic levels, as has the share of balances in serious delinquency.
Money management
Knowing where your money is going and allocating portions to certain categories — such as debt payments and savings — are basic financial management skills, but relatively few people do them. Fewer than 2 in 5 (38%) Americans follow a budget and about half (51%) track their spending on a regular basis, according to the NerdWallet survey. These practices can be particularly important when your cash flow is constrained, but no matter your income level, knowing where your money is going each month can help you make decisions when it’s time to cut back or reallocate.
Expense tracking and budgeting both support spending control, and may lead to increased saving and overall financial well-being. [0] [0] Budgeters are also more likely to keep up with financial commitments and save for long-term financial goals, such as retirement. [0]
Retirement preparedness
During the first two years of the COVID-19 pandemic, as many as 2.4 million people retired early, according to research from the Federal Reserve Bank of St. Louis. [0] Since then, the number of retirees has normalized and many of those early retirees have since returned to the workforce. [0] But their ability to retire — whether temporarily or not — was made possible, in part, by their retirement preparedness.
In the past 12 months, just one-fourth of Americans (25%) have developed or revisited their retirement plan, according to the NerdWallet survey. Interestingly, higher income Americans are more likely to say they’ve taken this action (34% with an annual household income of $100k+ vs. 16% with less than $100k), but there is no statistically significant difference across generations (24% Gen Z, 28% millennials, 24% Gen X, 23% baby boomers).
Just 54% of American families have retirement accounts, according to the most recent data from the 2022 Survey of Consumer Finances from the Federal Reserve.
Strengthening resilience
Building resilience is a matter of strengthening your ability to manage risks into the future. And while greater resilience is associated with some factors more difficult to change than others, including income and education, small behavioral changes may add up to increased resilience over time.
From a policy perspective, organizations and programs designed to strengthen resiliency can nurture an environment that makes these behavioral changes easier. Otherwise, suggestions to simply save more, spend less and get smarter about finances sound similar to “bootstrap” arguments that fail to account for many of the challenges inherent in improving your financial situation.
For individuals, however, habits that support greater resilience can be a fruitful endeavor, both for their household and on a larger scale. Improving your financial know-how, working on an emergency savings fund and paying down unmanageable debt are good places to start.
