If you have no financial reserves, you will have to go into debt if even a minor emergency hits you. This is the condition of most Americans.
They do not save. They are present-oriented. They live from paycheck to paycheck. They hope that nothing unexpected happens. Credit card companies wait on the sidelines, knowing that unexpected things do happen. Expensive unexpected things.
Here is reality.
Approximately 62% of Americans have no emergency savings for things such as a $1,000 emergency room visit or a $500 car repair, according to a new survey of 1,000 adults by personal finance website Bankrate.com. Faced with an emergency, they say they would raise the money by reducing spending elsewhere (26%), borrowing from family and/or friends (16%) or using credit cards (12%). . . .
The findings are strikingly similar to a U.S. Federal Reserve survey of more than 4,000 adults released last year. “Savings are depleted for many households after the recession,” it found. Among those who had savings prior to 2008, 57% said they’d used up some or all of their savings in the Great Recession and its aftermath. What’s more, only 39% of respondents reported having a “rainy day” fund adequate to cover three months of expenses and only 48% of respondents said that they would completely cover a hypothetical emergency expense costing $400 without selling something or borrowing money.
We are in an economic recovery. It is supposedly over five years old.
Something serious happened to Americans’ thinking about thrift in the last recession. They gave up. Mentally, they have not recovered.
There will be another recession. There always is. What will most Americans do then? They will go into debt.
The banks will be there, ready to loan money a double-digit rates.
People who refuse to save eventually go into debt. They remain in debt.
Retirement savings? It is a myth for most Americans. They will be 100% dependent on Social Security. But Social Security is going bankrupt. So is Medicare.
The Great Default will undermine most Americans’ trust in the federal government. But what will replace this faith?