Americans don’t have the money to handle common
emergencies like a car breakdown or a trip to the
emergency room for a broken bone.
a national survey by Bankrate.com, 63 percent of people
said they don’t have the savings to cover a $500 car
repair or a $1,000 medical or dental bill. Only four in
10 Americans would be able to rely on savings to cover
anything beyond their usual bills.
suggests most people are living paycheck to paycheck,
with common problems like a car accident or a sick pet
upsetting their ability to pay. The survey found that
only 23 percent thought they would be able to handle an
emergency bill by cutting other spending.
15 percent said they would cope by borrowing from their
family. And 15 percent would depend on a credit card.
findings mimic others and show that most Americans are
financially vulnerable. Although consumer confidence
numbers gathered each month by the Conference Board show
Americans feeling good about jobs after recovering from
the Great Recession, most still aren’t stashing money
Federal Reserve study of the "well-being of U.S.
households" in 2014 showed only about half of
people saving regularly in a separate account like a
December 2012, as the fear of recession was still fresh,
the savings rate in the U.S. climbed to 11 percent,
according to the Bureau of Economic Analysis. But it
fell to 4.6 percent in August and was at 5.5 percent in
November. Prior to the 2008 recession and housing crash,
Americans felt secure, and the savings rate dropped to
just 1.5 percent when people were dipping into their
home equity like a piggy bank — a practice that got
many people into trouble when home values plunged.
the recession, people have been rebuilding their
finances after millions lost homes and jobs and had
credit cards and other borrowing shut off by banks. As
the pressure has eased, they’ve become more likely to
Federal Reserve reported in 2014 that only 47 percent of
U.S. households surveyed were saving for unexpected
expenses. And if Americans were fortunate enough to end
up with $1,000 in extra income, almost half would spend
some of it. Only 17 percent said they’d save the
entire amount, while 20 percent said they’d devote the
entire amount to paying down debt.
the people most able to weather an emergency are those
with incomes over $75,000 or a college education,
according to the Bankrate.com survey. Yet, even with
incomes over $75,000, 46 percent said they wouldn’t
have the money to pay a $500 car repair. About 52
percent of people with college degrees said they wouldn’t
have $500 for the car emergency or $1,000 for an
emergency room visit.
issues seem to be both financial and behavioral. The St.
Louis Federal Reserve reported that the median income of
the middle class was 16 percent lower in 2013 than in
1989. But studies have also shown that people who are
able to save are not doing it. In a survey by the
Employee Benefit Research Institute, most Americans said
they could afford to save $20 a week, or $20 more a
week, but they didn’t think it would matter.
done by Annamaria Lusardi, a George Washington
University economist, shows that only a third of
Americans understand compounding. In other words, they
don’t know that if they borrow money and are charged
interest, paying off their debts becomes difficult as
interest builds up on old charges left hanging.
a study just done with PriceWaterhouseCoopers of
millennials, Lusardi found that 53 percent had carried
over a balance on their credit cards without paying off
charges fully. Nearly 30 percent were overdrawing on
they had to come up with $2,000 within a month, only
half thought they could do it. While many of the
millennials surveyed were confronting financial
challenges such as student loan debt, Lusardi found that
only 24 percent demonstrated basic financial knowledge.