The Most Financially Fragile Americans During COVID-19 Have Trouble Answering These Money Questions – Can You?

I’m not gonna pretend I went to some fancy business school or anything. Nobody in my family did. Most of what I know about money I learned the hard way, watching my parents juggle bills after the auto industry started bleeding out in Detroit. So believe me when I say I’m not here to make anyone feel dumb about what they don’t know.

But there’s new research out of George Washington University that’s kind of hard to ignore. They’ve been tracking what they call “financial fragility” – basically, could you scrape together $2,000 in a month if something went wrong? Car breaks down. Medical bill. Furnace dies in January. That kind of thing.

About a quarter of Americans couldn’t. Even before the pandemic. Now it’s probably worse.

And here’s the uncomfortable part: people who can’t answer some pretty basic money questions are way more likely to be in that situation.

The three questions researchers use

These have been tested for years across different countries. They’re not trick questions. They’re just… questions. See how you do.

1. You have $100 in a savings account earning 2% interest a year. After five years, would you have: more than $102, exactly $102, or less than $102?

2. Your savings account earns 1% interest. Inflation is 2%. After one year, can you buy more with that money, the same amount, or less?

3. True or false: Buying stock in a single company is usually safer than buying a stock mutual fund.

Answers: More than $102 (compound interest adds up over time). Less (inflation’s eating your purchasing power faster than interest builds it). False (spreading risk across multiple companies is safer than betting on one).

If you got all three, good for you. Genuinely. A lot of people don’t.

The numbers are rough

According to the Global Financial Literacy Excellence Center, only about half of American adults get all three right. The financially fragile folks? They averaged 1.7 out of 3.

The 2020 Personal Finance Index found that only 1 in 5 of the least financially literate people could come up with emergency money. But 3 in 4 of the most financially literate could.

Now look. I know what you’re thinking. “People who know about money probably have more money. Not exactly shocking.” And yeah, there’s that. But the researchers controlled for income and education. The relationship still held.

Knowing stuff helps. Even when you’re broke. Maybe especially when you’re broke.

Who’s hurting the most

This is where it gets harder to read. Financial fragility is highest among:

Black Americans. About half are classified as financially fragile. Women – nearly a third. People with less education. Lower incomes. Divorced, separated, never married.

These are also the groups getting hit hardest by pandemic job losses. You probably already knew that. But seeing it laid out with numbers makes it feel more real somehow.

Why I’m writing about this

Because we’re in the middle of a pandemic and people are making financial decisions under pressure. Should I cash out my 401k early? Take a home equity loan? Ask for rent deferment? What are the actual consequences of each choice?

If you don’t understand compound interest or how inflation works, you’re flying blind. And a wrong decision now can mess you up for years. I’ve seen it happen. To family. To friends. To myself, honestly, back when I was younger and even dumber about this stuff.

I’m not saying go get an MBA. But look up how compound interest works. Understand what inflation actually does to your savings. Learn why putting your whole retirement into one company’s stock is a bad idea (ask anyone who worked at Enron how that went).

Nobody taught most of us this stuff. Schools don’t. Parents usually can’t, because nobody taught them either. So we figure it out the hard way or we don’t figure it out at all.

The pandemic made a lot of things worse. But it also made clear what was already broken. Financial literacy in this country is one of those things. It’s been broken for a long time. We’re just noticing now because everything’s on fire.