Income Loss and Financial Distress during COVID-19: The Protective Role of Liquid Assets
39 Pages Posted: 22 Nov 2020
Date Written: November 19, 2020
Nearly a quarter of U.S. households have experienced job or income losses related to the COVID-19 pandemic. Liquid assets mitigate financial distress in the face of financial shocks such as job loss, yet this relationship in the midst of the COVID-19 pandemic is unknown. Using a nationally representative sample of U.S. households (N = 4,383) who completed a survey in the early days of the pandemic, we examined pre-pandemic liquid assets as a moderator of the relationship between job and income loss and difficulty meeting financial obligations and use of high-cost financial resources. Estimates from propensity score-weighted linear probability models indicated that greater liquid assets lessened the probability of experiencing all eight measures of financial distress and most measures of distress among households experiencing job or income losses. Policy efforts to help households build emergency savings can help households better prepare for future pandemics while also supporting public health responses.
Keywords: liquid assets, COVID-19, income volatility, job loss, hardship, debt, alternative financial services
JEL Classification: D14, I31, D31
Suggested Citation: Suggested Citation