[FONT=Calibri][SIZE=3]I couldn’t find another thread on this older topic, so here goes:
Could you pay for a $1000 emergency expense in cash (paper money, checking account, savings account - in other words not borrowed money)?
“A majority, or 64%, of Americans don’t have enough cash on hand to handle a $1,000 emergency expense, according to a survey by the National Foundation for Credit Counseling, or NFCC, released on Wednesday.”
I have noted that it was an “online poll” conducted by the NFCC. However, I have a hard time believing these numbers can be anywhere closes to reality.
I understand there is high unemployment, but that is around 10-15% (depending on who you ask). I also understand that there is a percentage of people that live paycheck to paycheck because of low salaries, and unusual circumstances. But how on earth do we rationalize 64%??
How on earth can you have a consistent job and not have more than $1000? Is everyone else that stupid and cannot stop themselves from spending every last dime of their paycheck before the next one comes?
I assume you mean liquid, in the bank, write a check. My answer is yes. However, I don’t think having thousands of dollars liquid is typical or even wise. I do agree that every working person should at least have a grand in an emergency fund that they can get to in short order.
Yes, a significant number of people live paycheck to paycheck. No one saves for anything, they buy something, and then figure out how to pay it off. Buy now, pay later. To them credit is the same as savings.
Yes, we have managed to keep a few thousand in the savings account, mostly to save for a down payment on a house. It’s slow going for us, but we have scrimped in many areas in order to set aside a little bit each month. If a disaster hit us that’d be gone pretty quickly though, so we’d like to have more in the bank.
i hope you’re wrong, because having less than a month’s salary liquid is living from pay to pay. i thought the conventional wisdom is to have at least 3-6 months pay as an emergency fund.
Makes perfect sense. Most wealth or class models indicate that between 45-65% of the US population would be fall somewhere on the continuum of underclass/chronically unemployed to working poor and working class. There is a lot of different income data available but even let’s say on average 15% of people live below the federal poverty rate at any given time. They clearly would not have 1K in the bank. SO, this additional 50% of people are working class (but above the poverty line). With family, bills, food, etc., it seems totally reasonable that they wouldn’t have the cash. BUT, it can also be true that poor financial choices play a fundamental role, it’s just that you have to be careful about painting with a broad brush on this issue.
I said yes, but wish there’d been an option to say “Yes, at the moment.” I have tried to keep some savings available while paying down debts. It seems something always comes up, between the down economy and my inability to say no when family and friends have emergencies I often am down to zero even when I keep my expenses below my earnings.
I do, but I can understand people who don’t. Jobs for the non-college-educated, or college-educated-in-nontechnical-fields don’t tend to pay all that far past subsistence.
People who frequent internet message boards are in some ways an “elite” community, where people tend to be technically-minded, and have at least enough extra to pay for an internet connection, so I anticipate the ratio here will be much lower.
Maybe it’s not actually 64%, but I think a significant number of us are struggling even if we’re not going under. Plenty of people who have a steady job right now are still recovering from some disaster that happened in the last couple of years.
I don’t have $1000, nope. In fact I didn’t go grocery shopping last week because we were out of cash–I paid some bills all at once and it was a bit too much. Our shower door also broke Monday (tempered glass, it shattered while we were gone for no reason anyone can understand) and we can’t afford to replace it, so I’m going to get a shower curtain.
In the past couple of years we’ve had two serious bouts of unemployment, and one of those came with no unemployment insurance because my husband’s startup went under. We’re working on the debt that piled up during that time. I didn’t earn any money over the summer, but now I’m back at work so that will help. We’re at a little bit of a low point right now and in a few weeks things will look much better, but the debt is still there–we’ve made good progress though.
Many of my friends are very frugal and careful with their money, and they have decent jobs–but they’re still only barely making ends meet. Probably that’s partly because salaries are so low around here by CA standards–my county has one of the highest poverty and unemployment (and depression) rates in the state. But times are hard all over, and we’re all feeling a pinch.
But to have an emergency fund sitting in your checking account? I can sell stocks or bonds within a day and take a penalty for early withdrawal of locked up funds if an emergency arises. I am certainly not going to allow my bank the use of my money for free or very nearly so just so I can go to the ATM and get my money out immediately.
My DH and I are retired, and we live a pretty frugal lifestyle in general, but unexpected things can, and will, happen. Therefore we have a savings account just for such emergencies.
Seriously? A full year’s salary in savings? Or do they mean in some sort of relatively liquid assets?
A full year’s salary starts getting into the realm of seriously investable cash- like buying 2-3 nice cars, or 1/3 of a house, or things like that.
I put away about 10% of my check each pay period into my savings account. Eventually it’ll be where I want it to be, but right now, I’m at about 3 months savings.
That’s good practice. No doubt about it. But my present cash flow conditions and the present condition of the economy haven’t really been conducive to using any kind of a savings plan. Passbook savings are stupid low, CD’s aren’t paying much, stocks and bonds have been downright flat or even scary within recent history. I looked at the difference between holding anywhere from $1000 - $15,000 in my checking account instead of short term semi-liquid investments and I’m stinging myself for maybe $200/year max. And that’s on the $15K side with lucky timing.
These last few years I’ve been putting three kids through college and remodeling a house and it’s worth foregoing the margins on semi-liquid investments just to be able to pay off the credit card bills and tuition without the added tax and processing paperwork.
Similar thread: “Could you get $2000 of emergency funds in 30 days?” The earlier thread was based on a National Bureau of Economic Research study, “This paper examines households’ financial fragility by looking at their capacity to come up with $2,000 in 30 days.”
Edited to add, yes, I could come up with a thousand dollars.
The advice is to have 3-6 (or 6-12) months living expenses in savings. If you are a dedicated saver, this can be really different from having 3-6 months salary. In fact, I found the easiest way by far to reach this point was to reduce my living expenses dramatically. This helped twice: one, the magic number got much smaller, and two, I was saving much more towards it each month!