Last year, Neal Gabler wrote in The Atlantic about Americans’ financial instability, noting that nearly half of them would have a hard time coming up with $400 to cover a sudden expense. That’s bad news, not least because many unexpected events—from an illness to car or home repairs—can lead to bills that amount to much more than that. A recent report finds that many American families can spend about half of their monthly income covering such expenses, with the median cost being around $2,000.
The report, put out by Pew Charitable Trust, includes the results of surveys conducted in 2014 and 2015 to see how Americans were coping with what are referred to as financial shocks—those one-off expenses that crop up from time to time. Pew found that in large part, Americans’ ability to weather financial shocks is partially dependent on something that Americans still struggle to accumulate: savings.
According to the report, savings can trump income when people have to deal with unexpected expenses; having $2,000 in savings allowed those in the lowest income brackets to recover from these events as quickly as those who made more money, but had less in savings. For example, around three-quarters of families that earned less than $25,000 but had $2,000 to $4,000 in savings said that they had a hard time recovering after a financial shock. That’s around the same proportion of families who said they had a hard time recovering even though they earn more—between $25,000 to $84,999—but had less than $2,000 in savings.