http://www.federalreserve.gov/econresdata/2014-report-economic-well-being-us-households-201505.pdf is the report.
Question E3A, shown on page 97, is the relevant one.
Note that the percentages add up to more than 100% since more than one can be selected. Page 18 of the report says:
I.e. paying with credit card that is paid in full at the next statement is included in “being able to pay an unexpected $400 expense”.
Yes, we could. I mean, we’d put it on the credit card for points and then pay it in full, but yes.
But up until about a year ago, no. There were times when I was an undergrad where I’d have to get an advance from my boss just to cover gas to get to work. (Luckily I worked at a small place with an understanding boss.)
I grew up in very “working class” neighborhood where there wasn’t much work to go around. I absolutely believe this and know many, many families that are in this situation.
IAW, #5, haha. It was found, if paying by CC, they can’t pay now, but will next month. Unless, of course something else comes up that didn’t this month. Another $400 expense they did not expect. So they pay the original debt but gave new debt, etc, etc. so the never ending debt cycle begins.
It looks like the answer is more realistically the 47% who pay in cash plus the 28.6 percent that would use their credit card and pay it off at the end of the month, unless those percentages represent same/ duplicate answers from same respondents.
As I said Romani, this includes many more than the poor or lower middle class. I
Respondents can choose more than one answer, so there are presumably some respondents who chose both of these answers.
Yes, and so could my kiddo who is out of college. Even D2 in college could (but I am covering most of her expenses & tuition right now, so maybe she doesn’t count).
Lots of people quote this finding. Lately, I’m hearing it from financial planners wanting to drum up business.
But when we hear it, we tend to automatically think of others being like ourselves. The percentage is two thirds of those earning under 40k would not have the liquidity (cash or functional equivalents.) I think we forget how difficult it is for the poor.
This study is interesting. But it covers a variety of SES and the quotable isn’t the same across the board…
My new cleaning lady came this week (third time) and told me how she’d had a dental emergency over the holiday weekend while camping in Kentucky. There were no dentists within 200 miles of where they were that would see her for an emergency, so she had to drive the 400 miles back to Illinois (in great pain) to find a dentist to see her on Monday. Final outcome? $2000 for two root canals (several roots had to be treated). I don’t know a lot about her yet, but she is a youngish (mid 30s) immigrant from Poland and I doubt very seriously has dental insurance. But what do you do when you are in so much pain? You really have no choice - well, I suppose she could have just had the teeth pulled for a lesser cost, but that creates a whole 'nother set of problems. I really felt for her, and suspect she is digging a deep hole that will take her a long time to get out of. But she’s a really hard worker and if anyone can do it, she can. But man, what a setback that happened in the blink of an eye.
There is a group of us living in an upper middle class bubble and it makes it hard to understand how a large percentage of America is living. Here I am today discussing which private universities I should visit this summer with my D… how can we really know what it’s like to live like your cleaning lady? I can tell I don’t have a pulse on a large group of the country by how surprised I was with the popularity of Donald Trump and Bernie Sanders. I would have never guessed in a million years that Trump could be president of the US or that a socialist could win so many primaries. I need to make sure my kids appreciate all they have and to teach them some charity and empathy for people less fortunate.
Dental emergencies. Car emergencies. Elderly relative needs. Emergency needs of your children. Emergency clothing needs (last pair of shoes with holes; child outgrows his/her coat). Minor illnesses that result in missed work or even job loss and therefore lost income. I could really go on and on. If you have ever worked with really low income people, you would absolutely know that this statistic is very real. Heck, an unplanned $50 emergency is hard for a lot of people out there.
Many don’t even have credit cards to use for these types of expenses. So what do they do? They go without. They live in a state of hopelessness. By this, I mean they do not even hope that one day their luck will change, and many have given up trying for better.
morris, yes… I just happened to live in a poor to middle class neighborhood which is what I was pulling from.
And yes, it includes more-than-middle class households, but I’d bet a dollar that the vast, vast majority that fall into this category are making ~$60k or less.
ETA: My parents do not fall into this category. They would fall into the “borrow from family” (me) category.
I have a friend who is a teacher, married to a teacher. Both have masters degrees. She had a work-related accident and couldn’t come up with $400 to repaid her Rx glasses which were broken in the accident but fortunately her folks advanced the funds, and were able to wait until worker’s comp could reimburse. She and her H live simply and only recently bought a 2 bedroom townhouse after decades of renting. They really struggle and are not alone. They drive old cars until they won’t run any more.
I count my blessings my kids and loved ones are mostly not living paycheck to paycheck. It’s an uncomfortable existence and too close to the edge for comfort.
Dental insurance usually covers up to $1000 or few thousands, but insurance companies have negotiated rates with dentists, so people with insurance will generally pay less than people without insurance. It is also the case for medicines and other medical procedures.
I tell my kids to have savings to cover up to 6 months of expenses because sometimes it could take that long to get another job. As a young adults they may not be able to get as much in severance. I know D1 is a lot more frugal than me. 
Many do NOT have dental insurance and even those that do often have huge gaps in what is and is not covered. Even items that are covered may only be covered up to 50% and be capped as to total amount covered.
College Confidential folks in general skew more affluent–there are many others struggling with how to get by and manage and are not thinking about how or where to go or send their loved one to any college.
Can’t take credit for telling our kids to have an emergency fund–they figured it out on their own, as they like sleeping well at night.
Morrismm, there was a thread on this very topic you must have missed, including discussion of the writer you mentioned hearing. http://talk.collegeconfidential.com/parent-cafe/1886431-the-secret-shame-of-middle-class-americans-from-the-atlantic-p1.html
In a recession, it can take a lot longer than 6 months to find a job.
Not really. Living paycheck to paycheck or “hand to mouth” is the best many, many Americans can do. It’s pretty depressing how much money one needs for emergency stuff and more depressing how much gets shoved onto credit cards with accumulating debt every month. Google the average credit card debt in this country.
I grew up in very “working class” neighborhood…>>>>>
Totally blue collar upbringing by the most frugal people on earth. By what they taught me about how to handle money and the desire to not have to be quite as frugal as they were is what drove me to get a college education and have more money to be comfortable. Same with my dh and his family was less well off than mine. He started working when he was 12 years old and “inherited” a newspaper home delivery route from his cousin.
@teriwtt reminds me of a story that here of a young man that passed away. He was basically a member of the working poor. He didnt have dental insurance but had some type of dental emergency. He was given an antibiotic, and a painkiller. He didnt have money to get both filled, and got the painkiller filled. He later died from the infection. It was such a sad story.