ABC News
40% of Americans don’t have $400 in the bank for emergency expenses: Federal Reserve
Almost 40% of American adults wouldn’t be able to cover a $400 emergency with cash, savings or a credit-card charge that they could quickly pay off, a Federal Reserve survey finds.
About 27% of those surveyed would need to borrow the money or sell something to come up with the $400 and an additional 12% would not be able to cover it at all, according to the Federal Reserve’s 2018 report on the economic well-being of U.S. households released on Thursday.
In addition, 12% of adults said they wouldn’t be able to pay their current monthly bills if faced with the unexpected $400 expense, the survey found.
The 2018 results are very similar to those from the Federal Reserve’s 2017 survey.
Overall, the number of people who said they are able to handle unexpected expenses is on the rise since the Federal Reserve began the survey in 2013.
However, 17% of adults in the U.S. said they are not able to fully pay off all of their current month’s bills.
Meanwhile, medical costs yielded other hurdles.
One in five adults had major, unexpected medical bills to pay last year, and one in four skipped necessary medical care in 2018 because they couldn’t afford it, the survey revealed.
Related:
The Independent
Almost half of American adults do not have $400 to spare, study reveals
Repairing your car, replacing a broken appliance or making an emergency visit to the dentist can be bothersome for some – for many Americans, it is impossible.
Four in 10 American adults would struggle to handle an emergency expense as small as $400, a new Federal Reserve survey reveals.
Currently, about 27 percent of the people surveyed would have to borrow money or sell something to cover the bill, while 12 percent could not pay for the expense at all.
Still, overall, Americans are better off financially than they were five years ago, when about half of the population could not handle such a bill.
Unsurprisingly, health-related out-of-pocket spending is often the thing that is costly for Americans. The most frequently skipped treatments are dental care appointments, at 17 per cent, visiting a doctor, 12 per cent, and prescription medicine, 10 per cent.
Demographic disparities persist: people living in rural areas, as well as black and Hispanic adults are more widely represented in the category of people who would struggle to meet ends in such a situation. Those with bachelor degrees or more education are also more likely to be able to pay for these bills. “Racial and ethnic minorities of each education level are even less able to handle a financial setback,” the study finds.
What the study does not reveal, however, is how the situation breaks by ages: so it is unclear whether millennials inflate the emergency expense unreadiness or not.
Related:
(Bloomberg) — Many U.S. households find themselves in a fragile position financially, even in an economy with an unemployment rate near a 50-year low, according to a Federal Reserve survey.
The Fed’s 2018 report on the economic well-being of households, published Thursday, indicated “most measures” of well-being and financial resilience “were similar to, or slightly better than, those in 2017.” The slight improvement coincided with a decline in the average unemployment rate to 3.9% last year, from 4.3% in 2017.
But despite the advance, the results of the 2018 survey indicated that almost 40% of Americans would still struggle in the face of a $400 financial emergency. The statistic, which was a bit better than in the 2017 report, has become a favorite rejoinder to U.S. President Donald Trump’s boasts about a strong economy among Democratic politicians, including 2020 presidential candidate Kamala Harris, the U.S. senator from California.
“Relatively small, unexpected expenses, such as a car repair or replacing a broken appliance, can be a hardship for many families without adequate savings,” the report said. “When faced with a hypothetical expense of $400, 61% of adults in 2018 say they would cover it, using cash, savings, or a credit card paid off at the next statement,” it added.
“Among the remaining 4 in 10 adults who would have more difficulty covering such an expense, the most common approaches include carrying a balance on credit cards and borrowing from friends or family,” according to the report.
Based on a survey of 11,000 people in October and November 2018, the report showed a quarter of Americans don’t feel like they are doing “at least OK” financially. That number was higher for black and Hispanic Americans, at roughly one third for both. For those making less than $40,000 a year, the share who felt they weren’t doing well was 44%.
“We continue to see the growing U.S. economy supporting most American families,” Fed Governor Michelle Bowman said in a press release accompanying the report.
“At the same time, the survey does find differences across communities, with just over half of those living in rural areas describing their local economy as good or excellent compared to two-thirds of those living in cities,” Bowman said. “Across the country, many families continue to experience financial distress and struggle to save for retirement and unexpected expenses.”
To contact the reporter on this story: Matthew Boesler in New York at mboesler1@bloomberg.net
To contact the editors responsible for this story: Margaret Collins at mcollins45@bloomberg.net, Alister Bull
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