Personal Finance

Survey Finds Average Unexpected Expense Exceeds $1,400

Each year, the Federal Reserve releases a report titled Economic Well-Being of U.S. Households. One of the data points the Fed looks at as part of this study is the percentage of Americans who could afford to cover a $400 unexpected expense. However, while the 68% of adults that reported being able to cover such an expense marked a record high, a new survey from Lending Club and PYMNTS shows that the average cost of an unexpected expense is far higher than that $400 number.

According to the new survey of more than 4,000 U.S. consumers, 46% of respondents reported facing at least one unexpected expense within the prior 90 days — including 24.4% who had multiple emergency expenses during that timeframe. Of those, 56% totaled more than $400. In reality, the average of these expenses came to $1,447.

These findings were accompanied by the fact that 59% of U.S. consumers describe themselves as living paycheck-to-paycheck. Although that’s down slightly from the 61% who reported being in such a situation last month, it is still five points higher than a year ago. Understandably, the income bracket with the largest share of consumers living paycheck-to-paycheck was those making under $50,000 a year. Of those in that group, 74% reported scraping by — however, this was down from 76% in July 2021. Meanwhile, the percentage of those making over $100,000 a year who were still living paycheck-to-paycheck rose from 34% last July to 43% in the latest survey.

Commenting on the latest report, Lending Club’s Financial Health Officer Anuj Nayar stated, “The need to update the $400 emergency expense benchmark is evident in this report. Inflation in the last year, let alone the last decade, has made it much more difficult for consumers to save while staying on top of their expenses.”

continued, “Not only are consumers saving less every month, but they are likely to encounter an emergency expense, if not multiple, putting them at a greater risk for increased financial hardship. This fact paves a financially difficult road ahead for consumers.” 

This survey once again shows that many Americans — regardless of their income level — continue to struggle with their finances. What’s more, with inflation being a top story over the past year, it’s no surprise that the paycheck-to-paycheck problem plaguing many consumers has only gotten worse. As for the $400 figure that Lending Club takes aim at in this release, while it’s true that the figure may be low in many cases, the Fed doesn’t claim that this is really the average but, instead, uses it as a benchmark. The bottom line is that, although it may be difficult to build one, emergency funds continue to be a game-changing tool for consumers, making them a top financial goal for those looking to break the paycheck-to-paycheck cycle they find themselves in.