Here’s How Many Americans Can’t Afford a $400 Emergency—The Numbers May Shock You

A major car repair. An unexpected medical bill. A broken appliance that can’t wait. These are the kinds of expenses that take a toll on monthly budgets and savings, and surveys show that many Americans would struggle to handle these and other financial emergencies.

More Than a Third Can’t Pay, or Would Sell, Borrow to Cover a $400 Expense

For its annual report on America’s economic well-being, the U.S. Federal Reserve surveyed more than 12,000 American adults and found that for the third year in a row, 63% of Americans said they could pay for an unexpected $400 expense with cash, savings, or a credit card paid off as soon as possible.

That means 37% said they either couldn’t pay it, would turn to a credit card with plans to pay it off later, sell something, borrow money from a friend or relative, or take out a loan of some kind. About 13% of the entire survey said they wouldn’t be able to cover the expense at all.

Aside from being able to afford an unexpected expense, another common metric of financial health is whether you have an emergency fund capable of weathering multiple months of expenses without income. According to the Fed’s survey, about 55% of Americans had enough in the bank to cover three months of expenses, compared with 15% who said they would have to sell things or borrow to afford that and 30% who said they couldn’t cover three months of living expenses at all.

Men Are More Likely to Have Emergency Funds

The 30% without three months of emergency savings is slightly lower than the 42% of Americans who said they didn’t have any emergency savings in a U.S. News & World Report survey of about 1,200 people from earlier this year. That survey also found that men were more likely to have an emergency fund than women, and that men tend to have more saved when they do have emergency savings.

The nation’s largest bank has also weighed in. JPMorgan & Chase & Co.’s (JPM) review of customer cash balances, spending, and access to credit, covering almost 6 million households last year, found that just 8% would be unable to cover a sudden $400 expense. This data, of course, comes with the caveat that it covers only those more likely to have savings since they aren’t among the unbanked.

About 77% of low-income households could cover the expense, but JPMorgan found that many would likely turn to their disposable income or credit cards instead of an emergency savings fund. The banking giant also found that the ability to handle the expense varied across age and racial lines, and the customer lived alone.

The Bottom Line

Financial emergencies are a reality most Americans will face, and the data shows you’re not alone if a $400 surprise expense would strain your budget. While 63% of people can handle such costs with cash or its equivalent, that still leaves more than one-third who would need to borrow, sell something, or couldn’t cover it at all.