Why Are So Many Households Unable to Cover a $400 Unexpected Expense?

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The brief’s key findings are:

  • About 40 percent of households, spanning the income spectrum, say that they couldn’t cover a $400 unexpected expense.
  • In fact, some of these households actually do have enough to cover this modest expense, but they feel constrained by credit card debt.
  • Overall, the analysis finds that the vulnerable households fall into two main groups:
    • those with low incomes, low educational levels, and/or a job loss; and
    • those with moderate to high incomes but with substantial debt, such as credit card balances, mortgages, and/or student loans.
  • This widespread lack of precautionary savings is likely one reason why many households have trouble saving for retirement.