Most Americans aren’t poor but many are financially insecure. If something unexpected happens, they don’t have the resources to cover it. They need to borrow funds, sell something, or resort to credit cards.
According to a new survey of 1,000 people, 63% of Americans can’t cover an unforeseen $500 expense like a car repair bill. Twenty-three percent would reduce spending to meet the deficit, 15% would borrow from friends or family, and a similar number would max out their credit card.
The poll, commissioned by Bankrate.com, is in line with others. The Federal Reserve Board said last year that 53% of Americans can’t cover an off-plan expense of $400 without selling something or borrowing money.
Thirty-one percent of respondents said they’d gone without some form of medical care so they could afford everything.
As you would expect, ability to cover emergencies is linked to income. Only 23% of people earning $30,000 a year said they could cover the $500 expense, according to Bankrate, but 54% earning $75,000 said they could. The Federal Reserve says 23% of the adult population has some form of educational debt, with blacks, Hispanics, and those going to for-profit institutions, facing the highest bills.
At the same time, Americans generally aren’t very good at saving money. The nation has one of the lowest rates of saving of any country in the world. That’s because Americans like spending and because they find it’s cheaper and easier to borrow money than in other places. Also, with interest rates at practically zero, it hasn’t been worth saving much recently.