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The US Fed came out with a stat a few years ago that 40% of Americans wouldn’t have cash to cover a $400 emergency: they’d have to sell something, borrow, or ot

The US Fed came out with a stat a few years ago that 40% of Americans wouldn’t have cash to cover a $400 emergency: they’d have to sell something, borrow, or other. That’s pretty much paycheck to paycheck if your savings are that low.

ghaff 2y ago
As I recall, there was also some disagreement in discussions over what "having cash" meant. A lot of people have ready access to assets that aren't necessarily literally cash.
eek2121 2y ago
We have no savings right now (I am not working) and could afford a $400 emergency, but we live paycheck to paycheck. Income is good, the extra just gets spent on various things due to having multiple disabled people in the house. Eventually we hope to rebuild the savings.
taxman22 2y ago
The question asked how somebody would pay for an unexpected $400 expense. If you answered “credit card” then you were considered to not have the cash to cover an emergency. I’d use a credit card…and pay it off when it’s due.
- dingnuts 2y ago
  YOU would, but a lot of people with credit cards don't even understand that it's a loan, or what compound interest is. They put the expense on the card and then pay the minimum payment, either until it's paid off with insane interest, or they keep racking up debt until they reach their limit and get a worse card, until they're trapped in a cycle of poverty seriously, everyone in this thread should watch Financial Audit and see how people outside the silicon valley bubble really live. That show has extreme examples to be sure but there are so many people like this
  - Aeolun 2y ago
    I find it hard to sympathize with people that have enough money to pay off their card bills but don’t actually do so because they can’t be bothered to read.
    - pastage 2y ago
      It is easy to make mistakes when you margins are razor thin. They might be stupid mistakes it still happens and you notice them more because your margins become even smaller. I have been there, being really poor was hard on me. Not an excuse for using credit cards, just an explanation why you should sympathize.
    - oblio 2y ago
      In many places the fault is not shifted to the potentially vulnerable or undereducated consumer and instead overdraft charges are capped. In the US everyone is basically forced to have a credit card and use it but many have little financial literacy, especially immigrants.
      - pmg101 2y ago
        I'm not in the US myself so I'm curious, how or why is everyone in the US basically forced to have a credit card?
        Aeolun 2y ago
        Because paper money is inconvenient as hell. Have you seen the size of those 25ct coins! And then you go to buy the cheapest bottle of water, and you need 20 of them to buy half a liter.
        pmg101 2y ago
        Oh I see. But I mean why not just a debit/bank card that allows you to pay with money you have but not with money you don't? You just meant card in general. Yes I agree cash is now very inconvenient.
- ghaff 2y ago
  Yep. In the US, I would of course pay for an unexpected car repair (or indeed most any expense) with a credit card. It doesn't mean it won't be paid off at the end of the month in essentially all cases. So one of those meaningless statistics.
- Jabbles 2y ago
  How are you all discussing this question from memory without linking to the source? Poorly, that's how. When faced with a hypothetical expense of $400, 63 percent of all adults in 2022 said they would have covered it exclusively using cash, savings, or a credit card paid off at the next statement (referred to, altogether, as "cash or its equivalent") https://www.federalreserve.gov/publications/2023-economic-well-being-of-us-households-in-2022-expenses.htm#:~:text=When%20faced%20with%20a%20hypothetical,cash%20or%20its%20equivalent%22 https://www.federalreserve.gov/publications/2023-economic-we...).
  - ChadNauseam 2y ago
    So this statistic means most people are not living paycheck to paycheck right? (Although I didn’t think that “paycheck to paycheck” meant you would be ruined by an unexpected $400 expense) Anyway, it still doesn’t seem like most people live paycheck to paycheck, according to your link: > Some financial challenges, such as a job loss, require more financial resources than would an unexpected $400 expense. One common measure of financial resiliency is whether people have savings sufficient to cover three months of expenses if they lost their primary source of income. In 2023, 54 percent of adults said they had set aside money for three months of expenses in an emergency savings or “rainy day” fund—unchanged from 2022 but down from a high of 59 percent of adults in 2021.
  - Izkata 2y ago
    I suspect multiple things are getting mixed together... I swear I remember reading what GP said much further back than two years ago. Edit: That said, the part you quoted supports GP, the part in quotes seems to be what they actually asked. Credit is probably not what most would think of as "cash equivalent", that would be debit, checks, and transfers like Zelle. 16% straight answered like that, if you scroll down to the next table for non-cash-equivalent payments: > Put it on my credit card and pay it off over time
    - jrmg 2y ago
      The question actually asked is also published. It was: Suppose that you have an emergency expense that costs $400. Based on your current financial situation, how would you pay for this expense? If you would use more than one method to cover this expense, please select all that apply. a. Put it on my credit card and pay it off in full at the next statement b. Put it on my credit card and pay it off over time c. With the money currently in my checking/savings account or with cash d. Using money from a bank loan or line of credit e. By borrowing from a friend or family member f. Using a payday loan, deposit advance, or overdraft g. By selling something h. I wouldn't be able to pay for the expense right now https://www.federalreserve.gov/publications/2024-supplemental-appendixes-report-economic-well-being-us-households-2023-appendix-a.htm https://www.federalreserve.gov/publications/2024-supplementa... Edit: The people running this survey also had the same thoughts about ‘maybe some people are choosing to not this directly even though they could?’ And added this question: Based on your current financial situation, what is the largest emergency expense that you could handle right now using only your savings? 1. Under $100 2. $100 to $499 3. $500 to $999 4. $1,000 to $1,999 5. $2,000 or more This is discussed just below the stats @Jabble sites! To explore this potential difference between how people would pay for a small, unexpected expense and whether they could pay for it with cash or the equivalent, the survey included a question asking people what the largest emergency expense was that they could handle using only savings. Eighteen percent of adults said the largest emergency expense they could handle right now using only savings was under $100, and 14 percent said they could handle an expense of $100 to $499
Aeolun 2y ago
That’s a weird stat. If I spend all my $10k/month so that I end up with $0, I’d be included in that stat, which is clearly insane.
Gigachad 2y ago
OP got divorced so they probably sold the house. Many people living on the edge could still end up pretty loaded if they sold everything and lived like OP.

ghaff 2y ago

As I recall, there was also some disagreement in discussions over what "having cash" meant. A lot of people have ready access to assets that aren't necessarily literally cash.

eek2121 2y ago

We have no savings right now (I am not working) and could afford a $400 emergency, but we live paycheck to paycheck. Income is good, the extra just gets spent on various things due to having multiple disabled people in the house. Eventually we hope to rebuild the savings.

taxman22 2y ago

The question asked how somebody would pay for an unexpected $400 expense. If you answered “credit card” then you were considered to not have the cash to cover an emergency. I’d use a credit card…and pay it off when it’s due.

dingnuts 2y ago
YOU would, but a lot of people with credit cards don't even understand that it's a loan, or what compound interest is. They put the expense on the card and then pay the minimum payment, either until it's paid off with insane interest, or they keep racking up debt until they reach their limit and get a worse card, until they're trapped in a cycle of poverty seriously, everyone in this thread should watch Financial Audit and see how people outside the silicon valley bubble really live. That show has extreme examples to be sure but there are so many people like this
- Aeolun 2y ago
  I find it hard to sympathize with people that have enough money to pay off their card bills but don’t actually do so because they can’t be bothered to read.
  - pastage 2y ago
    It is easy to make mistakes when you margins are razor thin. They might be stupid mistakes it still happens and you notice them more because your margins become even smaller. I have been there, being really poor was hard on me. Not an excuse for using credit cards, just an explanation why you should sympathize.
  - oblio 2y ago
    In many places the fault is not shifted to the potentially vulnerable or undereducated consumer and instead overdraft charges are capped. In the US everyone is basically forced to have a credit card and use it but many have little financial literacy, especially immigrants.
    - pmg101 2y ago
      I'm not in the US myself so I'm curious, how or why is everyone in the US basically forced to have a credit card?
      - Aeolun 2y ago
        Because paper money is inconvenient as hell. Have you seen the size of those 25ct coins! And then you go to buy the cheapest bottle of water, and you need 20 of them to buy half a liter.
        pmg101 2y ago
        Oh I see. But I mean why not just a debit/bank card that allows you to pay with money you have but not with money you don't? You just meant card in general. Yes I agree cash is now very inconvenient.
ghaff 2y ago
Yep. In the US, I would of course pay for an unexpected car repair (or indeed most any expense) with a credit card. It doesn't mean it won't be paid off at the end of the month in essentially all cases. So one of those meaningless statistics.
Jabbles 2y ago
How are you all discussing this question from memory without linking to the source? Poorly, that's how. When faced with a hypothetical expense of $400, 63 percent of all adults in 2022 said they would have covered it exclusively using cash, savings, or a credit card paid off at the next statement (referred to, altogether, as "cash or its equivalent") https://www.federalreserve.gov/publications/2023-economic-well-being-of-us-households-in-2022-expenses.htm#:~:text=When%20faced%20with%20a%20hypothetical,cash%20or%20its%20equivalent%22 https://www.federalreserve.gov/publications/2023-economic-we...).
- ChadNauseam 2y ago
  So this statistic means most people are not living paycheck to paycheck right? (Although I didn’t think that “paycheck to paycheck” meant you would be ruined by an unexpected $400 expense) Anyway, it still doesn’t seem like most people live paycheck to paycheck, according to your link: > Some financial challenges, such as a job loss, require more financial resources than would an unexpected $400 expense. One common measure of financial resiliency is whether people have savings sufficient to cover three months of expenses if they lost their primary source of income. In 2023, 54 percent of adults said they had set aside money for three months of expenses in an emergency savings or “rainy day” fund—unchanged from 2022 but down from a high of 59 percent of adults in 2021.
- Izkata 2y ago
  I suspect multiple things are getting mixed together... I swear I remember reading what GP said much further back than two years ago. Edit: That said, the part you quoted supports GP, the part in quotes seems to be what they actually asked. Credit is probably not what most would think of as "cash equivalent", that would be debit, checks, and transfers like Zelle. 16% straight answered like that, if you scroll down to the next table for non-cash-equivalent payments: > Put it on my credit card and pay it off over time
  - jrmg 2y ago
    The question actually asked is also published. It was: Suppose that you have an emergency expense that costs $400. Based on your current financial situation, how would you pay for this expense? If you would use more than one method to cover this expense, please select all that apply. a. Put it on my credit card and pay it off in full at the next statement b. Put it on my credit card and pay it off over time c. With the money currently in my checking/savings account or with cash d. Using money from a bank loan or line of credit e. By borrowing from a friend or family member f. Using a payday loan, deposit advance, or overdraft g. By selling something h. I wouldn't be able to pay for the expense right now https://www.federalreserve.gov/publications/2024-supplemental-appendixes-report-economic-well-being-us-households-2023-appendix-a.htm https://www.federalreserve.gov/publications/2024-supplementa... Edit: The people running this survey also had the same thoughts about ‘maybe some people are choosing to not this directly even though they could?’ And added this question: Based on your current financial situation, what is the largest emergency expense that you could handle right now using only your savings? 1. Under $100 2. $100 to $499 3. $500 to $999 4. $1,000 to $1,999 5. $2,000 or more This is discussed just below the stats @Jabble sites! To explore this potential difference between how people would pay for a small, unexpected expense and whether they could pay for it with cash or the equivalent, the survey included a question asking people what the largest emergency expense was that they could handle using only savings. Eighteen percent of adults said the largest emergency expense they could handle right now using only savings was under $100, and 14 percent said they could handle an expense of $100 to $499

Aeolun 2y ago

That’s a weird stat. If I spend all my $10k/month so that I end up with $0, I’d be included in that stat, which is clearly insane.

Gigachad 2y ago

OP got divorced so they probably sold the house. Many people living on the edge could still end up pretty loaded if they sold everything and lived like OP.