news.cuna.org/articles/Most_Americans_have_little_financial_cushion:_Pew

Most Americans have little financial cushion: Pew

January 30, 2015

WASHINGTON (2/2/15)--Even though more U.S. households are in a better financial position as the economy recovers from the Great Recession, most families are just one setback away from financial disaster, according to a new analysis by The Pew Charitable Trusts.

Click to view larger image(Pew Charitable Trusts Graphic)

Pew's report, "The Precarious State of Family Balance Sheets," draws from multiple nationally representative data sources to develop a clear picture of household financial security in the United States.

The majority of American households (55%) are savings-limited, meaning they can replace less than one month of their income through liquid savings. Low-income families are particularly unprepared for emergencies: The typical household at the bottom of the income ladder has the equivalent of less than two weeks' worth of income in checking and savings accounts and cash at home.

Even when pooling all of its resources--including from accounts that are potentially costly to access, such as retirement accounts and investments--the typical middle-income household can replace only about four months of lost income.

Although income and earnings have increased over the past 30 years, they have changed little in the past decade. The typical worker had wage growth of 22% between 1979 and 1999 but just 2% from 1999 to 2009.

Substantial fluctuations in family income are the norm. In any given two-year period, nearly half of households experience an income gain or drop of more than 25%, a rate of volatility that has been relatively constant since 1979. (See related article, League survey: Budgets important, but challenging for Iowans.)

The Great Recession eroded 20 years of consumption growth, pushing spending back to 1990 levels. Over the 22 years before the start of the downturn, household expenditures grew by 16%. But households tightened their purse strings after the start of the recession in 2007, and spending has yet to recover. As a result, the net increase in average annual household spending is just 2% since 1990.

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