Friday, January 30, 2015

Pew: The Precarious State of Family Balance Sheets

The Pew Charitable Trusts
January 29, 2015
The Precarious State of Family Balance Sheets

* The majority of American households (55 percent) are savings-limited,
meaning they can replace less than one month of their income through
liquid savings.

* Most families face financial strain across all balance sheet
elements: income, expenditures, and wealth. In addition to being
savings-limited, households face other financial challenges; just under
half of families are "income-constrained," reporting household spending
greater than or equal to their income; and 8 percent are
"debt-challenged," with payments equal to 41 percent or more of their
gross monthly income. Fully 70 percent of households face at least one
of these problems, with many confronting two or even all three.


Previous Pew research has shown that family finances are a critical
component of future economic mobility, not just for individuals but also
for their children. However many families, even those with relatively
high incomes, are walking a financial tightrope, and have little, if
any, cushion to absorb an unexpected financial emergency. What's more,
this is not a new phenomenon. While the most recent recession shined a
spotlight on the fragility of family balance sheets, the downturn alone
did not cause households' financial insecurity; many of the indicators
explored here have been stable for the past 30 years.

No single solution exists for stabilizing family balance sheets. Putting
families on solid financial footing and the road to upward economic
mobility will require a selection of thoughtful and strategic policy
interventions. As policymakers strive to increase opportunity for all
Americans, policies and programs that support asset accumulation will be
key. These efforts will also require careful design and rigorous
evaluation to ensure that they are effective in helping families improve
all elements of their balance sheets.


Comment by Don McCanne

Far too many American families simply do not have the income or assets
to meet unexpected expenses such as health care, especially now that
insurers are shifting more of the costs to patients. This Pew report
recommends "thoughtful and strategic policy interventions," carefully
designed and rigorously evaluated to be sure they are effective. We
already have a carefully designed and rigorously evaluated proposal for
health care - a single payer national health program, aka an improved
and expanded Medicare for all. We merely have to enact and implement it.

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