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Nearly Half of Americans Are Financially Fragile

Financial insecurity is more widespread than I realized.

This is not a good sign for the recovery. In past recessions, the housing sector played a key role in lifting the economy back to full employment, but we can't depend upon that this time. Thus, we need other sectors of the economy, e.g. household consumption, to step up and carry the load. However, with this degree of financial fragility, and with balance sheet rebuilding still underway, households may not be up to the task:

Nearly Half of Americans Are 'Financially Fragile', by Phil Izzo: Nearly half of Americans say that they definitely or probably couldn't come up with $2,000 in 30 days, according to new research, raising concerns about the financial fragility of many households. ...
The survey asked a simple question, "If you were to face a $2,000 unexpected expense in the next month, how would you get the funds you need?" In the U.S., 24.9% of respondents reported being certainly able, 25.1% probably able, 22.2% probably unable and 27.9% certainly unable. The $2,000 figure "reflects the order of magnitude of the cost of an unanticipated major car repair, a large copayment on a medical expense, legal expenses, or a home repair," the authors write. ...
Financial fragility isn't limited to low-income groups. ... "The ... surprising finding is that a material fraction of seemingly 'middle class' Americans also judge themselves to be financially fragile..."
Lusardi, Schneider and Tufano also looked at the ways in which people coped with an unexpected expense. Most would use multiple methods ranging from dipping into savings, asking for help from family and friends, using loans or credits cards, taking out payday loans or selling possessions. "Taken together with those who would pawn their possessions, sell their home, or take out a payday loan, 25.7% of respondents ... would come up with the funds for an emergency by resorting to what might be seen as extreme measures," the authors write. "Along with the 27.9% of respondents who report that they could certainly not cope with an emergency, this suggests that approximately 46.5% of all respondents are living very close to the financial edge." ...
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