How Many Americans Are Liquid Asset Poor?


More than five years after the beginning of the credit crisis and Great Recession, many American families are still financially vulnerable. Major economic indicators have made slow progress, but nearly half of households in the United States are liquid asset poor.

The number of people who do not have a personal financial safety net hasn’t improved in recent years. In fact, 44 percent of American households have less than three months worth of savings, and are unable to cover an unforeseen expense without going deeper into debt, according to a new report from the Corporation for Enterprise Development. Making matters worse, the 56 percent of consumers who have subprime credit scores may turn to a predatory loan to cover a financial emergency — prolonging the vicious debt cycle and insecurity.

“As millions of Americans today struggle to save for emergencies, investing in their futures is increasingly out of reach,” explains the report. “Flagging homeownership rates, declining retirement savings, and increasing college debt all contribute to the worst wealth inequality in generations. Without improved policies at all levels of government that help families earn more, save more, and build assets, the yawning income and wealth inequality gap in the United States will widen rather than narrow. Inaction consigns millions to persistent financial insecurity, dimming their economic future and the future of the nation as a whole.”

Who are the liquid asset poor? Interestingly, 76 percent are employed full-time, while 47.4 percent have at least some college education. One quarter of middle class households (those earning $56,113 to $91,356 annually) also have less than three months of savings. Liquid asset poverty is also more common in the South. All but one of the 10 states with the worst liquid asset poverty are in the South: Alabama, Mississippi, Georgia, Nevada, Kentucky, Arkansas, North Carolina, Tennessee, Louisiana, and Texas.

Screen Shot 2014-02-03 at 10.49.54 AM

Overall, income poverty is at an almost 20-year high and income inequality continues to worsen. The report finds that the top 20 percent of earners now hold more than 55 times the wealth of the bottom 20 percent. Recently, a surging stock market boosted household wealth, but many households are not invested in stocks and missed the rally. Furthermore, a weak labor market remains to raise concerns.

“As the unemployment rate slowly declines, the quality of new jobs created is a concern. Many available jobs are in occupations with low wages and few benefits,” the report explains. “One out of every five jobs (21 percent) nationally is in an occupation that provides median incomes below the federal poverty level. In three states — Alabama, Mississippi, and West Virginia — one-third or more of all jobs are low-wage. In an additional 14 states, more than one-quarter of all jobs pay poverty-level wages.”

More From Wall St. Cheat Sheet:

Follow Eric on Twitter @Mr_Eric_WSCS