What Is A Typical Money Emergency?
The definition of a money emergency is going to vary depending on your financial position. It may surprise you to know that for almost two-thirds of Americans an unexpected $500 expense constitutes a financial emergency.
Having an emergency fund of $1000 or more is the place to start to build your financial stability, but for most Americans that isn’t where they find themselves today.
These recent numbers reflect a slight improvement from 2016 but there is much improvement needed. Here is what the numbers look like.
About four out of 10 Americans said they had enough in savings to cover a surprise $500 expense. Another 21 percent said they would rely on a credit card, while 20 percent said they’d cut back on other expenses. Another 11 percent said they’d turn to family or friends for the money.
Dining out is the first place where consumers would cut back, with six out of 10 respondents saying they would eat out less. The least likely expense to face the chopping block? Mobile phone plans, with the survey finding that only 35 percent said they would cut back on their wireless plans to save money.
Americans who earn more than $75,000 per year — about a third more than the typical U.S. household earns — report more savings on hand, although almost half said they wouldn’t be able to cover a $500 surprise expense. Millennials represent the generation most equipped to handle an emergency cost, with 47 percent saying they have enough in savings to cover one. –CBS Moneywatch
Where Do Americans Turn When They Have A Money Emergency?
If almost two-thirds of Americans don’t have enough money in the bank to handle a $500 unexpected expense, what do they do when that happens. We all know that unexpected expenses happen on a regular basis. There are many different ways that people handle this situation. Here is a discussion about some of the things people to do meet those unexpected financial needs.
When Americans are short on cash, where do they get it? Most use credit cards or loans from people they know. About 15 million each year use at least one small-dollar credit product — products including payday loans and pawn loans — according to the nonprofit Chicago-based Center for Financial Services Innovation.
The source they choose can have big financial implications: Consumers who use bank and payday loans and credit cards to get out of cash crunches can be stuck with debt that is hard to escape. Most people who take out payday loans can’t afford to pay back all the money they owe by their next paycheck, according to the Consumer Financial Protection Bureau.
Options are widening. There has been a surge in new products for consumers short on cash, including online-only and peer-to-peer loans. Many activists and financial professionals are optimistic that more choice is good for consumers — but also warn that the financial terms matter most. A 2016 survey by Bain & Co. found that more than more than half of consumers did not compare offers when getting a loan…
According to a 2015 Fed survey, 38% of those who said they would be short $400 said they would put the expense on a credit card and pay it off over time.
Some 61% of U.S. adults have at least one credit card, according to the New York Fed. For those who don’t — or who have little, or poor, credit history — securing low-interest cards can be difficult. And consumers with higher incomes and credit scores are more likely to have credit cards than those in lesser financial circumstances.
The CFPB says companies that promote cards for subprime borrowers actively market to consumers with lower levels of education. Those consumers often don’t fully understand how the credit market works, according to the CFPB, and consequently represent more potential profit for lenders.
Some cards that market themselves as good choices for those with poor credit have interest rates above 35% in addition to annual and monthly fees. Financially “underserved” adults spent about $7.4 billion on subprime credit card interest and fees in 2015, according to the CFSI.
Personal finance experts suggest seeking no-fee credit cards with low interest rates and using them like debit cards, paying the balance each month. “If you have a one-time emergency expense, that is very different from an overspending habit,” said Rachel Podnos, an attorney and financial planner based in Washington, D.C.
For those who can’t, putting a $400 emergency expense on a credit card could have long-term consequences. (And some expenses, such as rent or taxes, generally can’t be put on cards without added fees.) – MarketWatch
If you need $500 tomorrow for an emergency do you have the cash on hand?