Why Would So Many Households Struggle With an Emergency Expense?

July 19, 2019

A recent Fed survey showed just how precarious many American’s finances are. The Fed’s 2018 Survey of Household Economics and Decision Making showed that 40 percent of American households would be unable to cover an unexpected $400 bill. The Center for Retirement Research at Boston College decided to look more closely at the claim.

They were struck by how those who said they would struggle with the expense came from many different income levels. What they found was that some households simply do not have enough money, and would have to resort to selling something or taking a loan to cover the cost. However, they also found that some of these households actually do have enough money in their bank accounts to cover the expense, but would still feel constrained. The reason for this is debt. Many American households do have $400 or more readily available, but this money is already earmarked to cover a credit card, student loan, or other debt obligation.

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