If you were suddenly faced with an emergency — a necessary repair or unexpected medical expense — how well could you handle it, financially? According to a new study, more than half of American families would likely be unable to come up with the cash to cover a significant expense in a month’s time. As the economy remains in the doldrums, even those who are still employed are no longer financially secure.
The study, published by the National Bureau of Economic Research, found that half of the respondents felt they would not be able to lay their hands on $2,000 in 30 days. That means that a blown transmission on the family car, a broken arm with no insurance, or even a temporary loss of income could wipe out a family, financially. The study’s authors dubbed the results a “widespread financial weakness in the U.S.” and noted that the problem “is not limited to the poor or to a small group of the population.” The issue also affects “those with higher-and-average income and higher educational attainment.”
Of those who felt they could obtain the funds in an emergency, almost 20% would need to sell personal property to do so while more than a quarter of them would have to resort to “extreme measures.” Traditional sources of emergency funds — family and friends — are tapped out these days and loans have gotten very difficult to get.
Certainly, one could dismiss this as being the result of bad financial planning or an unreasonable desire to live beyond one’s means, but when we’re talking about half the country, there’s something more wrong than a little over-indulgence. At the very least, it would seem our educational system has failed students in the area of fiscal understanding and responsibility. I think, however, that there is far more to the issue — high unemployment coupled with vastly reduced services results in the harsh economic times most of us are experiencing.
While it’s never easy to set money aside for a rainy day when you’ve got kids to feed and send to summer camp and take to Disneyland and so on, it’s still an important part of being a parent. I just wish the economy was such that it was as simple as cutting back on luxuries; I suspect most families have already cut back not only on luxuries but necessities as well.