More than 90% of households can handle a $400 expense shock, with low-income households showing unexpected resilience, according to a report released this week by The JPMorganChase Institute.
By the Numbers:
- Overall Resilience: 92% of households can cover a $400 expense using a mix of cash savings, disposable income, and short-term credit.
- Low-Income Households: 77% of low-income households can manage such expenses, though many rely on disposable income or credit.
- Credit Access: 43% of low-income households unable to weather small expenses could do so with more available credit.
Key Findings:
- Cash Savings: 67% of households can cover a $400 expense with cash alone.
- Disposable Income: An additional 20% can combine cash and disposable income to meet the expense.
- Credit Utilization: 5% can cover the cost using credit they can repay within three months.
Additional Insights:
- Variability by Income: While nearly all high-income households can cover a $400 expense, only 43% of low-income households can do so with cash alone. The remainder rely on disposable income or short-term credit.
- Larger Expenses: For expenses like $1,600, credit access becomes crucial. Only 25% of low-income households can cover this with cash or income, while credit enables another 12%, still leaving 63% unable to cover it.
- Consistent Trends: The share of households unable to cover expenses has remained steady throughout 2022 and 2023, despite rising interest rates and inflation.
The Bottom Line: The new data reveals a more optimistic view of American financial resilience than previously thought.
The Last Word: “Recent economic data has revealed conflicting perspectives about how Americans are faring financially, and how they view the health of the U.S. economy,” said Chris Wheat, president of the JPMorganChase Institute. “Understanding the full picture of household liquidity is essential to accurately evaluating the financial resiliency of both consumers and communities.”
