A new study indicates that renters may not be doing everything they need to be in a good position financially should something happen that prevents them from earning a living.
Roughly 1 in 4 renters said that they found it difficult to cover all of their monthly bills, based on a new report from self-regulatory organization FINRA, a rate two times higher than homeowners who said as much. More specifically, close to 60 percent of renters said they were certain that they couldn't come up with $2,000 in less than a month if there was an emergency. Slightly less than 30 percent of homeowners said that they definitely couldn't get this amount in a 30-day period.
Gerri Walsh, president of the FINRA Foundation, indicated that many renters may need to take an honest assessment of how they're doing economically, based on the results of the survey.
"Data from the FINRA Foundation's National Financial Capability Study paints a troubling portrait of renters in the United States," said Walsh. "Not only do renters tend to be more financially fragile than homeowners, renters significantly underperform homeowners on a test of financial literacy."
She pointed out that only 28 percent of renters were able to correctly answer at least four of five questions on a basic test that assessed respondents' understanding of finances. Meanwhile, about 45 percent of homeowners got at least 80 percent of the answers right.
Renters less likely to have insurance
Insurance may be one of the best examples demonstrating the difference between homeowners and renters. For instance, roughly 95 percent of individuals who own a house have homeowners insurance, according to a recent poll performed by ORC International on behalf of the Insurance Information Institute. Meanwhile, just 37 percent of renters have renters coverage.
Jeanne Salvatore, senior vice president of the III, indicated that it's in renters' best interest to purchase a renters policy, not only to protect their losses if their property is stolen or damaged, but also because the cost is affordable. Though plans vary depending on the insurer, the average is right around $185 for a full year of coverage, or what's the equivalent of about 50 cents a day.
The FINRA survey also found that renters are trailing homeowners when it comes to saving for an emergency situation. Just 1 in 5 said that they had enough money to cover three months' worth of expenses should they get sick or be laid off unexpectedly from their job. Meanwhile, roughly 50 percent of homeowners indicated that they had enough money to pay for everything if they fell on tough times.
The report concluded that there is currently a "dangerous combination" of poor financial literacy, a fragile economy and higher likelihood of income shocks, all of which could have an effect on renters and the rental market as a whole.