A sobering new report by the Corporation for Enterprise Development shows nearly half of U.S. households (132.1 million people) don’t have enough savings to weather emergencies, or finance long-term needs like college tuition, health care and housing.
According to the Assets & Opportunity Scorecard, these people wouldn’t last three months if their income was suddenly depleted. More than 30 percent don’t even have a savings account, and another 8 percent don’t bank at all.
Plenty of the middle class have joined the ranks of the “working poor,” struggling right alongside families scraping by on food stamps and other forms of public assistance.
More than one-quarter of households earning $55,465-$90,000 annually have less than three months of savings.
And another quarter of households are considered net worth asset poor, “meaning that the few assets they have, such as a savings account or durable assets like a home, business or car, are overwhelmed by their debts,” the study says.
Stuck on the wheel
Per the report, household median net worth declined by over $27,000 from its peak in 2006 to $68,948 in 2010, and at the same time, the cost of basic necessities like housing, food, and education have soared.
“The problem [is] fixed cost, the things that are difficult to “cut back” on. Housing, health care, and education cost the average family 75 percent of their discretionary income in the 2000s. The comparable figure in 1973: 50 percent,” Olen writes.
And, as the new report shows, wherever consumers can’t cope with costs, they continue to rely on plastic. The average borrower carries more than $10,700 in credit card debt, one in five households still rely on high-risk financial services that target low-income and under-banked consumers.