Most Americans don’t have the financial resources to cover a surprise $400 expense: a car or an appliance repairor a medical bill — without going into debt, according to a new survey.
Just over a third of respondents said they had cash on hand to cover spending, and the figure rises to 48% when including those who said they would use a credit card but would pay for it immediately before incurring a charge. interests, according to a survey conducted by decision intelligence firm Morning Consult for Bloomberg News.
Of the remainder, most said they would borrow through cards or some other type of debt to meet the expense, while 17% said they would not be able to pay it at all.
The data highlights widespread financial fragility, even in an economy with unemployment close to a 50-year low, and the erosion of some households’ accumulated savings buffer during the pandemic. It also shows how many Americans could be driven to take on more debt, even if interest rates rise, by a relatively common occurrence.
“We’ve had a really strong two years of job growth and there’s been a lot of coverage of the wage squeeze, with bottom earners actually experiencing faster wage growth,” said John Leer, chief economist at The Morning Consult. “And despite all of that, there’s still a group of mostly low-income adults who are extremely vulnerable.”
The findings show that millions of households, if faced with an unexpected $400 expense, would be unable to pay some of their other bills.
Furthermore, the inability to pay is not limited to the lowest income families. About 20 percent of the middle income group — those with incomes between $50,000 and $100,000 — said they couldn’t cover a $400 expense with cash or cash equivalents. The figure was 8% among those earning more than $100,000.
The survey results are similar to the Fed’s survey of the home economy and decision-making, known as the SHED survey. The next edition of that study will likely be published in the coming weeks. The new Morning Consult/Bloomberg survey will be conducted on a quarterly basis going forward.
The survey shows that emergency expenses are not that rare. Overall, 44% of respondents said they had incurred this expense in the previous month, with the most frequent cause being vehicle-related costs, followed by medical bills. The average size of an emergency expense was $483, and many respondents reported being affected by more than one.
According to Sofia Baig, an economist at The Morning Consult, the changing structure of the labor market, with more people depending on casual work, could also increase income uncertainty and make budgeting more difficult. These types of work arrangements also leave many families dependent on unscheduled and likely more expensive childcare, adding to financial strains, she said.
The Morning Consult survey was conducted between April 12 and 16, among more than 11,000 respondents.
—————————————————-
Source link