Could You Survive Three Months Without Income?
If you lost your job, how long could you afford rent, food, and other basic financial necessities? A month? Two? Three?
If your checking and savings accounts would be depleted within 90 days, you’re not alone; according to EARN’s latest opinion poll of over 1,000 adults, a full 54% of American families lack a financial safety net that would sustain them for three months without an income. Among low-income families making less than $35,000 a year, that figure rises to a disheartening 61%.
The poll asked families from all income brackets the following question: “Thinking about your household’s financial future, for how many months would your household be able to meet its basic financial needs if there were no outside source of money?” The most popular overall response? Just one month among low income people, while people with higher incomes indicated that they could hold out for more than six months.
Unfortunately, millions of Americans are going much longer than one month without an income. When EARN’s poll was conducted in late November, approximately 9.8% of potential U.S. workers (just over 15 million people) faced unemployment. And although job prospects are looking slightly more optimistic for the New Year, the average jobless person goes 34 weeks -- well over half a year -- without securing paid work.
When contemplating the suggestion that the national job outlook would remain poor over the upcoming year, unemployed poll respondents were more likely than employed respondents to indicate that they would cash in certificates of deposit (CDs), use their home equity, and borrow money on credit cards -- all strategies that might serve people in the short run but could eventually prove costly to both individuals and the general economy.
“As the economic downturn continues unabated, it has become bracingly clear that America’s families do not have the means necessary to weather long-term financial adversity,” said EARN President and CEO Ben Mangan. “This nationwide poll underscores the importance of savings, regardless of income level,” especially since the majority of respondents said they’d make ends meet by dipping into their savings account or making early withdrawals from their retirement funds.
And that’s one bright light at the end of a dark tunnel: as a result of the recession, families are reducing their consumer debt and saving more, making it possible for many to withstand the storm of joblessness and emerge unscathed (albeit a little lighter in the wallet). According to the Bureau of Economic Analysis, Americans currently save about 6% of their disposable income; that’s around three times more than they saved at the start of the recession.
EARN is leading the charge in helping families, especially those with limited incomes, to save consistently and invest in assets that build long term wealth and stability. Over time, we’ve found that a winning combination of innovative financial products, evidence based research, and fair public policies can help families create long-term prosperity, even in the face of adversity.
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Until next week,
Charlotte
Social Media Fellow
