By Daniel Hernandez
Asked how they’d pay for an unexpected expense of $1,000, most Americans say they’d borrow the money.
A survey by the National Foundation for Credit Counseling, or NFCC, found that 64 per cent of Americans don’t have enough cash on hand to cover an emergency expense of that amount.
Only 36 per cent said their rainy day funds would cover a $1,000 emergency.
The other 2,700 people polled said that they would either have to take out a cash advance on a credit card, or borrow the money another way.
Gail Cunningham, spokeswoman for the Washington, DC-based non-profit, told CNN Money: ‘It’s alarming. For consumers who live pay check to pay check – having spent tomorrow’s money – an unplanned expense can truly put them in financial distress.’
The report indicates that millions of Americans live without a financial safety net everyday.
While wages for middle-class were stagnate before the Great Recession, the housing and financial crisis, which wiped out more than $11 trillion in wealth in 2008 alone, has left legions of people indebted, battling against the threat of foreclosure, and looking for work amidst high unemployment.
The economy has left them with few options should the unfortunate strike.
‘Without adequate savings, consumers have poor resolution choices when an emergency arises,’ Ms Cunningham said.
When faced with that scenario, 17 per cent of respondents said they would borrow money from friends or family.
Another 17 per cent said they would neglect other financial obligations – such as credit card bills or mortgage payments – in order to free up funds.
As an alternative, 12 per cent of survey respondents said they would sell or pawn assets to come up with $1,000.
A small minority, 9 per cent, said they would need to take out a loan, and another 9 per cent said they would get a cash advance from a credit card.
The NFCC found the idea of neglecting other debt obligations, or acquiring more, rather troubling.
They wrote that this only means ‘exacerbating the problem for months or years down the road.’
Ms Cunningham added that: ‘Selecting any option other than taking the money from savings should be a red flag.