Last night I enjoyed an exciting encounter with the Federal Reserve’s “Report on the Economic Well-Being of U.S. Households”, and things quickly escalated – at least according to American standards.
Just when you think that writing about basic topics is uninspiring and unproductive – research such as this comes to light:
Only 45 percent of respondents indicated that they have set aside an emergency or rainy day fund capable of covering three months’ expenses.
No doubt the consequences of not having an emergency savings fund that provides enough of a cushion are dire; but what follows next could be even more dire. When asked how they would cover an unexpected $400 emergency expense, most responded they wouldn’t know where to turn.
47 percent of respondents indicate that such expenses would be more difficult for them to cover (than paying cash or credit card in full at end of month). Respondents indicate either that they couldn’t cover them (14 percent); would sell something (10 percent); or use one or more means of borrowing to at least partially pay for them, including paying with credit they pay off over time (18 percent), borrowing from family or friends (13 percent) or taking out a payday loan (2 percent).
47% of Americans could not cover an emergency expense of $400. There appears to be a marked difference between those with 3+ month emergency savings funds and those who don’t save at all – something brought home when considering an unexpected $2,200 pet vet bill for diabetic dog.
$400 may seem like an inconsequential sum, regardless of your income level, but failing to cover it equates to having no savings or being in debt; and failing to save can mean turning to credit cards and payday loans – two expensive forms of debt which often force families into borrowing or selling unwanted pets off as collateral – for financial support – something which can be highly stressful and troubling!
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