In the Atlantic, Neal Gabler cites an annual survey of the Federal Reserve Bank to “monitor the financial and economic status of American consumers” (2016). One survey question asked respondents how they would pay for an emergency expense of $400. Almost half (47%) of those taking the survey said that either they would cover the expense by borrowing or selling something, or they would not be able to come up with the $400 at all. Many experts believe this is due to the credit card debt that Americans have taken on. According to the most recent data from the Survey of Consumer Finances by the U.S. Federal Reserve, the average credit card debt of U.S. households is approximately $5,700. At the same time, people’s dependence on credit card debt has been pushed by banks. Last year over two billion credit card solicitations were mailed out by banks and financial agencies.
Section 11 talks about savings in great detail, but it’s important to know that having emergency savings can significantly add to your personal well-being. Personal finance experts recommend that you have a goal of accumulating six months of expenditures (mortgage, food, etc.) in a secure bank account. In good economic times, 90% of those who are laid off find a new job within six months. Further, regular unemployment compensation typically only lasts 26 weeks and, depending on which state you live in, ranges from $235 (Mississippi) to $650 (Connecticut). This payment will likely not cover the mortgage, the utilities, and food for most of us. A six-month nest egg will dramatically reduce our stress while looking for a new job.