Oct 2015
The Role of Emergency Savings in Family Financial Security: How do Families Cope with Financial Shocks?
Despite the diversity of their financial situations, many American households share a surprising vulnerability. Families, even those with higher incomes, can be disrupted by just one financial setback. In focus groups conducted by The Pew Charitable Trusts, most participants agreed that having enough money to comfortably pay the bills and build savings is the core element of a stable financial life. But expenses or lost income that families do not plan for, such as from job loss, illness, injury, death, or a major home or vehicle repair, can create significant pressure, even for the economically fortunate. Pew defines these events as financial shocks, and for many families, they can be devastating: The median household does not have enough liquid savings—money held in checking and savings accounts, unused balances on prepaid cards, and cash saved at home—to replace even one month of income.