WASHINGTON–Many families continue to struggle financially despite the improved economy, and it’s most often due to an inability to pay for financial emergencies, according to two new studies from The Pew Charitable Trusts.
For the two new reports, Pew said it analyzed its Survey of American Family Finances from two years, 2014 and 2015.
In its report on income volatility, Pew said it looked at those people who experienced a particularly strong pay swing, which was defined as a year-over-year change in income of 25% or more. In that analysis Pew said it found that at least one-in-four households — regardless of income, education or race — saw significant income shifts. And the swings created insecurity, whether people earned more or less, Pew said.
Pew reported it found that, at the median, households with income gains saw an increase of $20,500, and those with drops lost $25,000. “But think about this: The median households with a loss experienced a whopping 49% decrease in income,” Pew said.
To be considered in a volatile income situation, Pew said a family making $80,000 would need a loss in pay of $20,000. For a family earning $24,000, a $6,000 reduction would do it. But for a family making $10,000, a drop in income of just $2,500 can create “financial chaos,” according to Pew.
In the second report, Pew said it examined how financial shocks — a job loss, illness, death or major car repair — “can spin people out of financial control.”
According to Pew, approximately 60% of U.S. households experienced a financial shock in 2014, and many of them struggled to regain their footing. Some were further destabilized by aftershocks occurring soon thereafter, it reported.
Half of the Pew survey respondents — no matter the income level — who had the money to handle a typical financial emergency of $2,000 experienced financial difficulty in the wake of the event, according to Pew. Even if they had a savings cushion to handle a $4,000 emergency, 43% still struggled after such a blow, according to Pew.
Pew said what both surveys show is that many families continue to walk a “financial tightrope.”