Disaster Discourse: The Hagerty Blog

Facing the Nation’s Largest Active Disaster: Liquid Asset Poverty

Brock Long
Executive Vice President Brock Long

As emergency managers, it is our job to help the communities that we serve prepare for uncertain events. It is our responsibility to understand the natural and manmade hazards that these communities face and to develop effective strategies to address these hazards to help achieve resiliency against all threats.  I want to take a moment to address an issue that I believe is the single greatest limiting factor on citizen preparedness and our ability to achieve resilience at the community level – Liquid Asset Poverty. Too many American households do not have the financial resources necessary to weather the unexpected disruptions that accompany daily life, much less a disaster.  Liquid Asset Poverty is the biggest active disaster in America, and as emergency managers, we must adapt our thinking and approach to citizen preparedness.

What is Liquid Asset Poverty and Why Does It Matter?

According to research conducted by the United States Bureau of Labor Statistics and compiled by the nonpartisan Peter G. Peterson Foundation, personal savings have been steadily declining and are near a 40-year low. The result? Households do not have the resources to effectively respond to financial disruptions that often follow major natural disasters. To put this into context, Bankrate.com commissioned a survey in 2016 that found that 63 percent of American households do not have enough in savings to withstand an unexpected $500 expense.

Source: Peter G. Peterson Foundation. (c) 2016 Peter G. Peterson Foundation

The Corporation for Enterprise Development (CFED), a national nonprofit dedicated to expanding economic opportunity for low-income families and communities in the United States,  releases an annual scorecard that measures the ability of households to cover basic expenses for “three months if they experienced a sudden job loss, a medical emergency or another financial crisis leading to a loss of stable income.” CFED found that nearly 44 percent of American households are one misstep away from financial disaster and have no safety net to weather emergencies.

Improving Public Policy to Achieve Resilient Communities

While the Department of Homeland Security and FEMA should be commended for the Ready Campaign, the program’s focus needs to change now. The campaign has historically urged citizens to prepare for an emergency by building a three-day emergency supply kit, making a family emergency plan, and being informed about the different types of emergencies that can occur and how to respond.  For many citizens, this is an unrealistic financial ask.  The Ready Campaign and the emergency management profession does not go far enough to address true community resilience based upon realistic economic capabilities of most Americans.

Achieving true disaster resiliency is not possible until we address the nation’s largest active disaster –  liquid asset poverty. After a disaster, FEMA Individual Assistance (IA) is made available to citizens with little or no means to overcome disaster. The support they receive through this program is a temporary patch that does not achieve future resiliency. As more and more Americans live pay check to pay check, the need for Individual Assistance is growing.

As a community of emergency managers, it’s time to take a different approach.  We must first educate ourselves about how to overcome Liquid Asset Poverty.  Next, we must realize that FEMA cannot create a “true culture of preparedness” alone, and we must form nontraditional partnerships and take more responsibility for educating citizens on personal financial responsibility and the need to save money.

Three Recommendations for the Emergency Management Community to Address Liquid Asset Poverty

If we truly want to achieve resilient communities in the future, here are a three recommendations to help us begin tackling America’s largest active disaster:

  1. Encourage savings as a community resilience strategy – As a community of emergency managers, we should encourage citizens to set aside a rainy-day fund adequate to cover a minimum of three months of household expenses. Research conducted by the National Association of State Budget Officers finds that most states maintain rainy day funds greater than 1 percent of total expenditures to meet unanticipated budget shortfalls, and this is a practice that FEMA is actively trying to incentivize. Citizens should be taught to do the same.  This can help ensure that a household will not lose key wealth-building assets, such as a home, during a financial setback which could possibly threaten the household’s long-term resiliency.  The US Securities and Exchange Commission already has resources that every American should access at if they want to learn why it is important to save and invest.
  1. Form partnerships outside of the traditional emergency management community – The emergency management community should form new non-traditional partnerships to educate citizens about how to become more disaster resilient. FEMA headquarters is coincidentally located across the street from the US Department of Education.   Perhaps FEMA, the US Department of Education, and the US Securities and Exchange Commission should come together to develop a holistic education campaign that sets our kids up for future financial success.
  1. Introduce no-cost or low-cost citizen preparedness measures – The Ready Campaign must introduce no-cost and low-cost ideas for increasing resiliency. This could include campaigns to teach citizens critical skills like CPR or how to turn off water and gas lines. Learning emergency response skills offers a greater return on investment than asking citizens to buy and maintain a stockpile of three days of supplies.

We need to take a broader view of resilience — starting with understanding that financial literacy equals disaster resiliency.  Until then, true whole-community resiliency is unattainable.

Brock Long is Hagerty Consulting’s former Executive Vice President. Brock is a former Director of Alabama’s Emergency Management Agency (EMA) and has more than 16 years of experience assisting and supporting local, state, and federal governments. Brock developed Alabama’s response to the H1N1 influenza and served as the on-scene State Incident Commander for the Alabama Unified Command during the Deepwater Horizon oil spill.