Why Americans Can’t Come Up with $400

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In Beavercreek, Ohio, the cleanup from a recent tornado has begun. But debris is still piled high on many residents’ lawns.

“What we’re seeing following this tornado is people not having enough cash to pay upfront for house debris removal even though insurance companies will reimburse them,” former mayor Brian Jarvis said on Twitter. The debris cleanup comes on top of other costs like temporary housing in this city east of Dayton.

Much was made recently of a survey in which four of every 10 American families said they could not cover an unexpected $400 expense. But no one explained why. New research has some answers.

Even when people have $400 in their checking or savings accounts, they don’t always feel like they have the money to spend. That’s because they may have already committed the funds to paying off their credit cards, according to an analysis by Anqi Chen at the Center for Retirement Research.

This problem isn’t confined to low- and middle-income people either: 17 percent of households earning more than $100,000 would have to scramble to find the extra $400.

The study uncovered what cash-strapped families have in common.

First, consider the families who have $400 but don’t feel they can spare it. They’re often burdened by mortgages, credit card debts, or student loans.  Although they feel broke, this group, in fact, includes high- and middle-income households with financial advantages, such as positive net worth and a retirement plan at work.

Second, turning to the families who do not have $400, much of this group is disadvantaged by low incomes and low education levels. Some are borrowers with negative net worth – their incomes tend to be on the low side too. A few are homeowners, who may be having difficulty paying the mortgage, usually the largest household expense.

This study gives us a better understanding of why too many Americans aren’t able to look past today to make sure they’re saved enough money to retire.

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Chuck Miller

This shows that with incomes essentially flat for many years (except the top 1%), families make ends meet using debt. It’s also why the savings rate is so low… it’s not that they don’t want to save, they feel they can’t.

Geoffrey Hewitt

I think a major cost most Americans feel they can not afford is the massive cost of health care now at $3.7 trillion in the U.S.; larger than the federal budget by $400 million and 18% of GDP and still growing faster than inflation for 40 years. It will eventually bankrupt the country.

    Edward Hoffer MD

    Agree with Geoffrey Hewitt. “Only in America” is medical debt the leading cause of personal bankruptcies. As the cost of care skyrockets, even those with employer-based health insurance are faced with higher co-pays and deductibles. We have to get the monster of US health care spending under control for the future of the country – at least for all but the top earners.

    Read my book and get motivated: Prescription for Bankruptcy.

Philip Kremsreiter

Fine topic, but no solution. Education! Not just financial education which is what is stressed (save for retirement, learn to budget, clip coupons, pay off credit cards or cut them up, etc…), but values and the role money plays or should play in one’s life. You can go into the poorest village in the poorest country and find happy people. We need to teach people both what money/wealth is and values together.

Paul Curley

Timely topic. Reminds me of the 10% rule in the “Richest Man in Babylon” book, and the importance of automating the savings process (akin to the Automatic Millioniare by David Bach). Thank you.

Mike Mas.

Although I don’t disagree with the points made above on healthcare costs, I would like to offer some thoughts not yet mentioned. “People covet what they see,” said Hannibal Lechter in The Silence Of The Lambs. Here in Southern New Jersey, new housing developments routinely offer McMansions with Man-Cave basements on oversized lots, and they sell out quickly. A look at any parking lot shows almost nothing but SUV’s with brush guards, fog light bars, and rear DVD players lest the little darlings get bored on the way to soccer practice.

Brew pubs are springing up right and left, and it’s difficult to get into restaurants even on weekdays (when us retirees like to eat out…only with coupons or Groupons, of course!) Fifty Five inch TV’s have become the norm, as have cable bills well over $100/month.

It is possible to live simply without living a life of deprivation. I always strove to live on 80% of whatever I was making, saving and investing the other 20%. I bought one-year old Fords and Chevys, brought coolers on car trips, clipped coupons, and was able to retire at 52…having made a respectable (but not six figure) income.

People, go read Your Money Or Your Life. Get it for free from your local public library (hint, hint).


It is the effects of job losses in U.S. You can have an education but lose your job that provided benefits. Then fall into the temp gig world where you start to save a little only to have the job end. Have to use savings to make ends meet, which can be anywhere from 1 day to over a year. Then let’s mention the biggest deterrent: age discrimination in the workforce.

Not everyone has family to stay with or help them out. I want our politicians to start talking about age discrimination and low wages.

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