WARNING: WHAT YOU read next may be interpreted as a rant—because it is.
I’m tired of hearing about how Americans are unprepared for or even minor financial emergencies. A few years back, it was the inability of 40% to 50% of us to come up with for an emergency. The $400 figure has been used to prove everything from the extent of inequality to how Americans struggle to manage money.
Other studies set the hurdle at $1,000. These studies are even more suspect. One recent survey claims of us couldn’t come up with $1,000 in an emergency—but another, conducted in 2021, says . Remember, we aren’t talking here solely about Americans living in or close to poverty. Instead, these studies include many who are middle class and above.
But at the same time, clearly many families are somehow managing to save. During the pandemic, the bottom 70% of Americans by income collectively saved about $1.1 trillion. The total by the entire population is estimated at $3.7 trillion.
I recently viewed a 2016 YouTube video on “financial fragility” from PBS NewsHour. It included an interview with writer Neal Gabler, who published an article in The Atlantic. Gabler said he was among the 47% of Americans who didn’t have $400 to his name. The interviewer asked how much of this was caused by his own decisions.
He listed a few personal circumstances, like being a writer, living in an expensive area, having two children and sending them to college. Then came the big “forces beyond our control” moment. Gabler noted that real household income has risen modestly since the 1970s, while costs have grown dramatically, especially college.
Yup, there are financial things beyond our control, but the ability to accumulate a modest emergency fund is not one of them. Let me go shopping with a middle-class family and I’ll find savings equal to $400 in a month or two.
Do you really need that new pair of shoes? Can you do your own nails for a couple of months? Why not make coffee before leaving for work, instead of paying $5 for a Venti whatever? I say skip eating out until you’ve accumulated an emergency fund. And forget buying those lawn blowups for every holiday. Am I being silly? I think not. It all adds up.
My daughter works part-time in a daycare center. One family, with two children enrolled, is $2,000 in arrears on daycare fees. Yet the family spent spring break at Disney World. An emergency fund? Financial priorities? You’ve got to wonder.
My contention: Building and maintaining an emergency fund should be part of a family’s budget, not an afterthought. The vast majority of Americans have no excuse for not having a modest emergency fund. Ditto for saving regularly for retirement.
I say, where there’s a will, there’s a way. What that means, simply, is that your standard of living should be based on your income after taxes—and after money is set aside for savings. Isn’t that the only responsible way to live?