Emergency savings dangerously thin even for upper-income earners according to CNN

[someguy]

American families are on financial thin ice - Jan. 29, 2015

According to this the average middle income family has only 21 days of cash or cash-equivalent funds available and 119 days if they liquidated all retirement accounts. It doesn't say how or if penalties and taxes are included in these calculations.

It also states high earners (essentially those making at least six figures) have only 52 days of cash on hand.

Perhaps the most interesting thing of all to me is the comments. There seems to be such a sense of entitlement to a lifestyle beyond one's means. Also, a lot of rationalization ("doing it for the kids", etc.).

 

[aja8888]

American families are on financial thin ice - Jan. 29, 2015


Perhaps the most interesting thing of all to me is the comments. There seems to be such a sense of entitlement to a lifestyle beyond one's means. Also, a lot of rationalization ("doing it for the kids", etc.).

What comments? Link doesn't show comments.

 

[someguy]

What comments? Link doesn't show comments.

Scroll down to the bottom and wait a minute. CNN must be using some kind of active application to load comments in real time. On my fast machine, they start showing within 5-10 seconds. On an old laptop, it takes longer.

 

[aja8888]

Scroll down to the bottom and wait a minute. CNN must be using some kind of active application to load comments in real time. On my fast machine, they start showing within 5-10 seconds. On an old laptop, it takes longer.

Not showing. Maybe it's my Firefox browser.

 

[LOL!]

This is about cash on hand. I don't have any cash on hand, but I could get some by selling assets.

If some pollster called me up on the phone or came to my door and asked me about how much "accessible cash" I had, what do you think my answer would be?

I do agree that the poor probably have less than month's worth of cash and live close to the bone. But the wealthy? Give me a break.

 

[W2R]

American families are on financial thin ice - Jan. 29, 2015

According to this the average middle income family has only 21 days of cash or cash-equivalent funds available and 119 days if they liquidated all retirement accounts. It doesn't say how or if penalties and taxes are included in these calculations.

It also states high earners (essentially those making at least six figures) have only 52 days of cash on hand.

Perhaps the most interesting thing of all to me is the comments. There seems to be such a sense of entitlement to a lifestyle beyond one's means. Also, a lot of rationalization ("doing it for the kids", etc.).

The comments are about what I expected, though also they are appalling.

My guess would be that forum members (edited to add: except "LOL!"! )all have considerably more than 21 days' expenses in cash savings. My financial plan (to which I rebalance periodically) specifies 5.5% cash. And yes, that is more than 21 days' worth.

 

[Amethyst]

Re: comments on news sites. I used to read them, but not any more. They sound like the same few people making the same dumb comments over and over.

Amethyst

 

[purplesky]

American families are on financial thin ice - Jan. 29, 2015

According to this the average middle income family has only 21 days of cash or cash-equivalent funds available and 119 days if they liquidated all retirement accounts. It doesn't say how or if penalties and taxes are included in these calculations.

It also states high earners (essentially those making at least six figures) have only 52 days of cash on hand.

Perhaps the most interesting thing of all to me is the comments. There seems to be such a sense of entitlement to a lifestyle beyond one's means. Also, a lot of rationalization ("doing it for the kids", etc.).

Middleclass wages have been flat for decades. Kids College, healthcare, retirement saving, aging parents, etc. all help put the average wage earner in the paycheck to paycheck category.

Millions of Americans work their behinds off just to make rent and keep the lights on.

Lets not beat up on the whole middle-class and assume everybody feels entitled.

When was the last time America got a substantial raise? 25 years?

We have been in a low wage race to the bottom economy for a long time.

 

[ERD50]

Yep, averages and other things make this pretty worthless. Actually, the wealthier you are, the less cash you need on hand. You can afford to sell something, or put on a high limit CC and pay it off when it is due (no fees).

I only keep ~ 2 months cash, and only that much because I'm lazy and don't want to watch my checking account balances too closely. I want my money working for me.

...

When was the last time America got a substantial raise? 25 years?

We have been in a low wage race to the bottom economy for a long time.

And your solution? Pixie-dust? People need to have an emergency fund (not necessarily cash), and LBYM, whatever their income may be.

-ERD50

 

[someguy]

I wasn't categorically beating up on anyone.

My primary point was simply that the cost of basic necessities as a percentage of median income has gone down. However, there are a host of new wants to fill in and potentially even exceed the savings from necessities: CATV, smart phones, membership to various organizations, expensive activities and lessons for kids, wanting to live in desirable areas, much bigger average home size, air conditioning (regional) and more. Some items may be debatable, like entitlement to college and recent medical advances that have relatively low bang for the buck (usually high cost with low outcomes).

Middleclass wages have been flat for decades. Kids College, healthcare, retirement saving, aging parents, etc. all help put the average wage earner in the paycheck to paycheck category.

Millions of Americans work their behinds off just to make rent and keep the lights on.

Lets not beat up on the whole middle-class and assume everybody feels entitled.

When was the last time America got a substantial raise? 25 years?

We have been in a low wage race to the bottom economy for a long time.

 

[someguy]

And your solution? Pixie-dust? People need to have an emergency fund (not necessarily cash), and LBYM, whatever their income may be.

-ERD50

+1

 

[Walt34]

Given the levels of debt and numbers of people living paycheck-to-paycheck this is not surprising that they don't have much if anything in savings.

 

[Midpack]

One of many standard, well worn article subjects. The fundamental causes are the same, as are the "solutions." I only wonder if young writers think they've discovered something, or editors make young writers rehash the topic when there's nothing else to write about. Her turn (pic below) this time, senior, really?

It's why I stopped subscribing to money magazines and watching money channels on TV a long time ago, if you read one for 12 months, you've seen 90% of what you're going to read in years thereafter.

 

[Options]

This is about cash on hand. I don't have any cash on hand, but I could get some by selling assets.

If some pollster called me up on the phone or came to my door and asked me about how much "accessible cash" I had, what do you think my answer would be?

I do agree that the poor probably have less than month's worth of cash and live close to the bone. But the wealthy? Give me a break.

This. You have to be very careful with these types of click grabbing headlines, particularly coming from any mainstream media site (e.g., CNNMoney). I'm too lazy to look at the underlying poll research on Pew, but a change in middle class status overall is old news anyway.

A more helpful article? Perhaps how people with average incomes pulled off LBYM and either retired early or retired well. It happens everyday.

Edit: I do troll MSM business sites to keep abreast of current propaganda. Example: the current political (regardless of party) all the rage focus on the state of the middle class. Alternative media has been all over this in great detail for well over a decade.

The truth shall set an investor free.

 

[MichaelB]

The comments are about what I expected, though also they are appalling.

+1

My guess would be that forum members (edited to add: except "LOL!"! )all have considerably more than 21 days' expenses in cash savings. My financial plan (to which I rebalance periodically) specifies 5.5% cash. And yes, that is more than 21 days' worth.

We sure have more than 21 days, and that's not counting our emergency fund - the intermediate muni fund is technically not cash-equivalent.

If anyone is interested, the Pew study is here http://www.pewtrusts.org/~/media/Assets/2015/01/FSM_Balance_Sheet_Report.pdf and the Pew study home page is here The Precarious State of Family Balance Sheets

One comment - the graph shows the cash & equivalents to be higher than at any time since 1989 for 4 of the 5 quintile groups, fully recovered from the '08 recession. No framework or standard is presented for comparison, so we really don't know what they "should" be, but the improvement should be noted.

 

[unclemick]

If you owe a couple of bucks you're in trouble - if you owe millions?

What is that famous one - They asked Walt Disney if he was rich? He said he must be he was 7 million in debt.

heh heh heh - Now it's billions with a B - or an IPO which kinda takes the fun out it.

 

[Chuckanut]

Emergency savings dangerously thin even for upper-income earners according to...

Insufficient emergency funds is a huge problem for many people. I have seen people work hard to pay off a debt, get hit with an unexpected expense and be back in the land of 18%+ credit card payments. Not so good.

 

[Winemaker]

My involvement in management/labor contract negotiations over the past 20 years primarily comes down to this; Management will pay an increase to wages equal to the amount proven to be the increase in cost of living. If a national contract, the increase is based on an agreed upon national index, if local, then an agreed upon local index. That withstanding, I know a lot of the indexes have been buggered up as to make the pols look better. Also, since we have been moving some jobs overseas for various reasons, the supply and demand rule still rules. If there is a shortage of willing/educated workers available to due the required job, then wages will go up. If there is a very large pool of skilled workers, then wages will be suppressed. Unfortunately, the 50% or more of the labor pool has poor skills, cannot be trained, and that is why wages are stagnant. We have been turning into a service economy for years and continue to keep pressure on wages.

 

[Options]

I would say the percentage of the labor pool with poor skills may very well be higher than 50%. What employers learned after the economic meltdown and resulting massive layoffs was they could do without all of the low performers.

I've said it before and i'll say it again: we are in a winner-takes-it-all economy and in the historic fight between labor and capital labor is losing. The CIA, British equivalent of the CIA, and the European equivalent (forget names) have all come out with very recent reports on the massive displacement of labor due to automation, globalization, and the transformation of information. Automation is a huge factor.

 

[Jay_Gatsby]

A more helpful article? Perhaps how people with average incomes pulled off LBYM and either retired early or retired well. It happens everyday.

Rarely happens for a few reasons.

First, LBYM'ers keep a low profile, since their relative "wealth" would only engender extreme jealously from those "less fortunate" (and maybe a few loan requests or more expensive gifts). As an aside, I dislike the phrase "less fortunate," as it implies that one's economic state is a matter of fate/fortune, rather than primarily one of choice.

Second, articles about LBYM'ers won't sell newspapers - people want to read about people like themselves (i.e., that they're "normal" - everyone's in debt). They do not want to read about people who are more "fortunate" (there's that word again) than themselves, which would only force them to confront their bad decisions and accept responsibility.

Third, even articles about LBYM'ers that explain "how I did it - and you can too!" won't sell newspapers. The "sacrifices" described in such articles are too much for many people to contemplate. What? You saved 40% of your income? No new car every 3-5 years? Cheap vacations? No new iPhone, TV, latest gizmo? No new clothes for a year? All are hard for people living above their means to accept.

 

[Jay_Gatsby]

I would say the percentage of the labor pool with poor skills may very well be higher than 50%. What employers learned after the economic meltdown and resulting massive layoffs was they could do without all of the low performers.

I've said it before and i'll say it again: we are in a winner-takes-it-all economy and in the historic fight between labor and capital labor is losing. The CIA, British equivalent of the CIA, and the European equivalent (forget names) have all come out with very recent reports on the massive displacement of labor due to automation, globalization, and the transformation of information. Automation is a huge factor.

So are we going to experience the equivalent of the French Revolution? Doubtful, but I'm a huge supporter of the concept (not the actual execution) of government programs that help people learn skills that are in demand. Unfortunately, the current educational system is not designed to impart in-demand skills. We have long since moved away from blue-collar training in high schools, vocational tech school (instead of college), and financial education (anyone here remember learning how to balance a checkbook in Home Economics? I did!)

 

[Walt34]

Unfortunately, the current educational system is not designed to impart in-demand skills. We have long since moved away from blue-collar training in high schools, vocational tech school (instead of college), and financial education (anyone here remember learning how to balance a checkbook in Home Economics? I did!)

There is hope in some places. Here in WV Blue Ridge Community and Technical College offers classes in things like welding, CNC maintenance/repair, electrician, truck driving, chef, plumbing, and a lot of others, all trades that will be in demand for the foreseeable future and that pay enough to support oneself and/or bootstrap oneself to what one really wants to do.

I do remember taking a financial basics class in HS, I forget what they called it - how to figure interest, the difference between a savings and checking account, stocks and bonds, and of course how to write a check and balance a checkbook. It was one of the two most practical classes I took in HS. The other was typing.

 

[Big_Hitter]

100K a year is very relative - it's chump change if you live in NYC and a crap ton if you live in OKC


but anyway I'm not surprised by the lack of savings nowadays. I guess I'm thankful that my parents were born during the great depression.

 

[Winemaker]

Unfortunately, the educational system is not to educate anymore. There are "students", that have no business being in a classroom, that bring everybody down from the superintendent, principal, teacher, hs ,gs, k. There are hired administrators that constantly search and apply for federal and state funds to cater to certain groups/agendas. Teachers spend too much time on bureaucrat required paperwork and not enough time teaching. Classroom time is cut short by bad behavior, lack of discipline at home, threat of lawsuits, and petty crap like providing paper and pencils to students that are unwilling, too stupid, too cool to bring their own to class. My wife and daughter are both teachers.


Now I need a glass of wine.....

 

[NanoSour]

Talk about trying to make much ado about nothing. If you can believe the first graph in the article, the 21 day figure has changed little since 1989. Since then we've been through one of the greatest bull markets (late 90's) and the "Great Recession". Seems the sun keeps coming up and the vast majority of American's just continue on with life, regardless of how many days in salary they have available.