Even 6-figure families are often strapped for cash, study says
It's not just low-income households whose savings are lacking.
Americans don’t always do such a great job of saving money, but when we think about those with minimal or nonexistent savings, we often imagine low-income families struggling to make ends meet. It’s therefore somewhat shocking to learn that nearly 25% of households earning $100,000 to $150,000 a year claim they couldn’t come up with $2,000 in a month’s time.
In a study published by The Brookings Institution, participants were asked whether they’d be able to come up with $2,000 within 30 days for an unexpected expense. Across all income levels, over 25% of respondents admitted that they could not come up with that much money, while another 19% claimed they could do so only if they sold off possessions or took out payday loans. In other words, nearly 50% of Americans on the whole are considered, as the study puts it, “financially fragile.” And while we might expect lower earners to fall into this category, the fact that so many six-figure families aren’t saving means their money management skills just aren’t up to par.
Those who earn more often spend more
A big part of the problem is that higher earners tend to fall into the trap of taking their healthy incomes as an invitation to spend more. Higher earners are more likely to get approved for substantial mortgages and other loans than those who earn less, so many make the mistake of spending first and saving second (or not at all). The Brookings study authors admit that while the percentage of cash-strapped six-figure families is perhaps higher than it should be, the numbers are less surprising when we consider the high costs of living in desirable neighborhoods, housing prices, and child care expenses.
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