WASHINGTON—A new study indicates that U.S. households are walking a “financial tightrope,” and that many families have little if any cushion to absorb an unexpected financial emergency.
That finding is from The Pew Charitable Trusts "The Precarious State of Family Balance Sheets” study, a report attempting to project a clear picture of the current state of household financial security. The study examines the ways three components of family balance sheets—income, expenditures, and wealth—have changed over the past several decades, how they interrelate, and why understanding family finances requires that they be examined together.
Pew points out that even families with relatively high incomes have insufficient savings. “What’s more, this is not a new phenomenon. While the most recent recession shined a spotlight on the fragility of family balance sheets, the downturn alone did not cause households’ financial insecurity; many of the indicators explored here have been stable for the past 30 years.”
Pew stated that no single solution exists for stabilizing family balance sheets. “Putting families on solid financial footing and the road to upward economic mobility will require a selection of thoughtful and strategic policy interventions.”
Key Findings
- Two percent is the total growth in earnings for the typical U.S. worker from 1999-2009. Earnings growth has changed little in the past decade. By comparison, it was 22% for the typical worker between 1979 and 1999.
- Nine days is the length those at the bottom of the income ladder can survive on liquid savings, the study found. The majority of American households can replace less than one month of their income through liquid savings. Low-income families are particularly unprepared for emergencies.
- Seventy percent of U.S. households face financial strains on income, expenditures, or wealth. Many families confront not just one but two or even all three of these challenges.
- Six percent is the growth in average household expenditures since 1984, after adjusting for inflation, according to the report. These include funds from accounts that are potentially costly to access, such as retirement accounts and investments.
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