U.S. Families: Not Poor But Feeling Poor

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New research shows the share of Americans who lack enough ready cash on hand for emergencies shot up in the aftermath of the Great Recession.

These families do not have access to the liquid assets – cash or funds in their checking or savings account – to cover emergencies like layoffs, health crises, or even car repairs, according to an analysis of federal data by Caroline Ratcliffe of the Urban Institute, who presented the finding to the Congressional Savings and Ownership Caucus in late September.

Ratcliffe’s measure of financial fragility was families who did not have enough liquid assets to subsist at federal poverty levels for three months.  That amounts to $2,873 for a single person, $4,883 for a family of three, and $5,888 for a family of four.

By this measure, 37 percent of families in the middle income group – earning $35,600 to $57,900 a year – in 2010 were financially fragile – up sharply from 28 percent in 2007, a year before the Great Recession began.  No income group was spared by the downturn: in most cases, the share of families at risk increased between 9 percentage points and 13 percentage points.

Ratcliffe said that financial problems can cascade if cash-poor families resort to high-cost loans or credit cards to pay their bills, and building wealth becomes extremely difficult.

“A shortage of liquid assets can lead to cycles of debt when financial emergencies arise,” creating “further financial instability,” she said.


Do we have a savings crisis in America? There are suggestions in the media that we have a retirement crisis, but this article suggests that the crisis goes beyond retirement to savings, in general. Is it a crisis, or are we just lazy and disorganized? Funny how we will do graduate level research before we buy a car or a hi-def, 3D TV with Feelaround(TM), but nobody seems interested enough in their future selves to do some basic research on their workplace 401k or a good mutual fund for an IRA.

Larry Littlefield

One of the incredible ideas from the 2000s was that people didn’t need savings for emergencies, because they could use their credit cards for emergencies. I actually read that advice from some idiot financial guru.

Joel L. Frank

How can the ruling class expect us to save when they allow the banks to pay us less than zero in real interest rates and then turn around and let the same banks charge us 25 percent when using their credit cards?

Is this how the ruling class protects a society’s middle class?

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