Do you have enough cash on hand for an emergency? A stunning poll from The Associated Press-NORC Center for Public Affairs Research found that most Americans could not answer that question positively. And oddly enough, the answer wasn’t all that affected by income level:
Seventy-five percent of people in households making less than $50,000 a year would have difficulty coming up with $1,000 to cover an unexpected bill. But when income rose to between $50,000 and $100,000, the difficulty decreased only modestly to 67 percent. Even for the country’s wealthiest 20 percent – households making more than $100,000 a year – 38 percent say they would have at least some difficulty coming up with $1,000.
And this is what they said they would have to do if faced with an unexpected expense:
The inability to handle a financial emergency is one of the signs of personal financial illiteracy, and it leads directly to precariousness and economic vulnerability. Having liquid assets — even a small rainy day/emergency savings stash — is critical, and will protect you from devastating events such as eviction, according to a previous study:
If only financial (i.e., liquid) assets are considered (e.g., savings, 401(k), bonds), then nearly 80 percent of low-income working families are asset poor2—highly vulnerable to eviction and other financial vagaries and assaults.
The good news is that the Urban Institute found that the fund doesn’t have to be large: between $250-750 is enough.
Get your students started on the right path by incorporating lessons from WorldView Software’s Economics: An Interactive Approach. For example, review with your students the Overview: The Individual Consumer sections “Saving and Investing,” and “Economic Goals and How to Achieve Them.” Then use the Case Study: Money Management to walk your students through the steps of creating a realistic budget for themselves, as well as how to review the budget as they grow up and their financial picture changes.
Preview WorldView Software’s programs for free at http://www.worldviewsoftware.com/preview/