Last Updated May 24, 2011 1:16 PM EDT
A new study published by the National Bureau of Economic Research paints an exceedingly gloomy portrait of the financial stress suffered by American families. Respondents were asked to answer a simple but telling question: Could you come up with $2,000 in 30 days to pay for an emergency? The lowlights:
- 24.9% of respondents reported being certainly able to raise $2,000.
- 25.1% probably able.
- 22.2% probably unable.
- 27.9% certainly unable.
These results are stunning. When Harvard Business School professor Peter Tufano, one of the authors of the report, related the results to more than a hundred of his colleagues at a recent seminar -- a polished crowd that tends not to surprise easily -- a collective gasp filled the room.
Why did the researchers choose $2,000? The amount 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 research was done by Annamaria Lusardi of the George Washington School of Business, Daniel J. Schneider of Princeton University and Harvard's Tufano. Although offering no policy recommendations other than citing the need for more research, the group did suggest some possible steps to be considered:
- Government support in the form of tax and regulatory policies that support long-term asset building.
- Help from financial institutions in terms of new products that facilitate emergency support.
- More academic studies on how consumers cope with financial surprises. For example, do they depend on family support, sale of assets or additional borrowing to get by? What is the state of family financial literacy, and how can that be improved?
- Want Americans to Save? Make Them Play Lotto
- Helping Cash-Strapped Families Save for the Future
- Consumer Finance Taught for First Time to Harvard MBAs