The amount that is used as the threshold for an “emergency” expense is likely a lot higher than people have been using, and that could be bad news for companies in the accounts receivable management space.
Economists — and even the Federal Reserve Board — has used $400 as the benchmark average cost for an “emergency” expense for years, but inflation and rising costs of living have bumped that number to $1,400, according to a published report.
- Just like gumball machines that don’t take pennies anymore (are there even gumball machines anywhere outside of an oil change place?), the average costs for things such as trips to the emergency rooms or having to fix or replace a flat tire are not as cheap as they used to be.
- Given that 60% of the population in the United States lives paycheck to paycheck, there isn’t much in the cupboard to cover an expense of that size on a moment’s notice.
- About 13% of consumers have spent more than they have made in the past three months – which means they aren’t able to afford their current expenses, let alone one of the emergency kind.
- When faced with with emergency expense, about half of consumers use cash, while 23% are borrowing through their credit card and paying the balance in full. Almost 20% are borrowing through their credit card, but not paying off the full balance.
