Having an Emergency? Sorry to Hear That.

Can you handle an emergency?  What kind you might ask.  What if I said it were an emergency that would cost you $400 from your cash or savings account.  Could you handle that?  According to a new study by the Federal Reserve that was published this May, 2019 if you are like 4 out of every 10 Americans, you could not.  You couldn’t do it; couldn’t come up with $400.  About 1/3rd of the people surveyed said they would need to borrow or sell something to raise the $400, and 12% said they couldn’t pay it all.

We are enjoying an unprecedented, strong economy (bull market for over 10 years), low inflation, strong jobs market, rising wages, and we still have 40% of Americans unable to cover a $400 emergency from cash.  From my standpoint, this is troubling news, but do you want to hear the real head scratcher from my standpoint?  According to the same report, over three quarters (75%+) of all adults report that they are “doing OK” or “living comfortably” when asked about their economic well-being.  This is the same group of people that had 40% of them unable to pay a $400 emergency!  News Flash – if you don’t have $400 for an emergency, you are not “doing OK”!

So, what should we do here?   Should we shame these folks?  Of course not.  Should we pay them more money?  Who thinks that is going to solve the problem?  I guess we could simply ignore the problem and be thankful this is not us?  Or is it?  Wait let me check.
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The better alternative is to teach solid money management skills.  Few young adults get basic skills taught to them anymore and are left figuring these things out for themselves, where they have varying degrees of success.   The challenge is how to do this in a cost effective manner?  The answer – the workplace.  If you are an employer interested in helping your employees learn some of the basics of cashflow and budgeting, give me a call and we can talk about setting something up.  Afterall, do you find it concerning that 4 out of every 10 of your employees do not have $400 for an emergency?