Today it's an article on Salon (I know, I know, what did I expect?) about the declining fortunes of the middle class. Now, that's not a hacky proposition on it's face. Wages are pretty stagnant for the majority of Americans and there's a lot of income inequality today compared with the last 70 years or so.
But this article isn't really about that. It's headline is "Myth of the middle class: Most Americans don't even have $1,000 in savings." That's a pretty extreme statement. Most Americans, after all, own homes (63.7% according to the Census). It's a bit odd to think that there'd be around 14% of homeowners without $1000 hanging out somewhere (assuming the homeowners are among the wealthiest and the "most" Americans who have no cash are the poorest 50.1%).
So I thought I'd check it out further. First, the "most Americans" bit comes from a statistic in the fourth paragraph:
More than half of Americans — 56 percent, to be exact — have less than $1,000 combined in their checking and savings accounts, according to a recent survey, Forbes reported.Right away you'll notice that there are more cashless homeowners than I originally assumed. It's now around 20%. Yikes! (And getting more implausible...) The link takes you to a Forbes article that then cites another source: a blog post from some website called Magnify Money. It appears to be a website that matches users to financial products. There's a lot of information on the site about debt reduction and the whole thing seems pretty geared toward Millennials, which may be an important detail later...
Their blog post isn't so terrible. It's just a blog post after all, not reporting from a news source. The tenor of the piece is that people spend a lot of money on Christmas gifts and don't feel all that bad about it. To back this up, the website has done a "nationwide poll" and found that 63.7% of respondents were "broke" (meaning they had less than $1000 in their combined checking and savings accounts at the end of the holiday season). The post goes on to suggest ways you can be a little less broke in the future.
If you scroll down further you can learn more about the poll. It was conducted between December 24-26 and had a total of 518 respondents. The poll was conducted by Google Consumer Surveys, which is a Google service that lets you put together your own poll and stick it on your website.
This poll isn't really "scientific." It's just some quickie survey that a personal finance website stuck online for a bunch of their likely customers to take. This isn't an indication of what the savings of Americans looks like. It's an indication of what the savings of a handful of young people who like hipstery money websites look like right after the biggest spending season of the year. I'm sorry, but that demographic doesn't come anywhere close to matching the median American that the Slate article is referring to, nor does it reflect well on the Forbes columnist who decided to add it to her own article.
The second financial "fact" listed in the Slate article - which also makes an appearance in the Forbes article - is from a Bankrate survey. As the Slate article puts it:
Furthermore, almost two-thirds of Americans — 63 percent — do not have enough in their savings for an emergency. A substantial majority of Americans would need to borrow money if faced with an unexpected expense.Where does this information come from? Bankrate paid a survey company to conduct a survey of 1000 Americans right at the height of the Christmas shopping season (tis the season to worry about savings accounts, I guess). In that survey 37% said they'd pay for an unexpected expense with savings, leaving 63% with some other response (cutting spending, borrowing from friend/family, or pulling out a credit card).
On the face of it, you could assume that only that 37% actually has money to pay for an unexpected expense, but I'm not convinced. I'm a credit card deadbeat, which means I pay my credit card bill every month. When unexpected expenses hit, I pull out my credit card. Why wouldn't I? It's a pain to carry huge wads of cash. It's risky to keep a ton of money in my checking account (there's more fraud protection on the credit card). And I have a 1% back, no fee credit card. When my cat needed to go the emergency vet I wasn't going to waste time hitting an ATM or transferring money from one account to another. I paid by credit card and transferred the cash after my tears had dried. I'm sure I'm not the only person with savings who pulls out the plastic when money needs to be spent. I don't have recent numbers, but in 2009 about a third of credit card holders were deadbeats (see NYTimes) and some portion of those are going to use plastic for unexpected, large expenses. That's especially true if they keep their rainy day savings in a separate account (like I do).
Another 23% of the Bankrate survey respondents said they'd simply cut spending to pay for an emergency expense. I think it's wrong to assume that those people don't have any liquid savings either. I often adjust my spending based on what has cropped up that month. It's not because it's a financial necessity, but because it's how inherently stingy people function. If I was thinking about buying some new clothes but the car breaks go out, I pay for the breaks and put the brakes on the clothes shopping for a month or two. If spending money is inherently uncomfortable (which it is for people like me), an unexpected expense just makes spending more money later even less appealing.
This survey never actually asked people if they had easy access to $1000 of their own money. They asked how they'd choose to pay for an expense, which is different.
Finally, I'd just like to say that I really, really hope that the reality isn't that 56% of Americans lack $1000 in money they can access quickly without penalty. First, because that's really sad. But second, because it would suggest that Americans have truly atrocious money management skills. That number implies that the median American has no real liquid savings of any kind. But the median household has an income of about $51,000 a year. Plus, the median American adult is in their 40s. And the vast majority of people earning the median income have been earning similar incomes for at least the last 5 years (median earners tend to make their money as wages, which are fairly stable from year to year). If you can earn 50 grand a year for several years but can't figure out how to stash away a measly thousand dollars, you've got some serious problems. Now, perhaps there are a handful of people who have special circumstances. But the median American isn't paying for cancer treatments. Nor have they lost their house to an uninsured flood. Nor have they spent all of their savings being ransomed by pirates. The median American has a job and had one last year and the year before. They've had small setbacks, but not ones that have wiped out everything they own.
That's why I don't buy it. And repeating numbers like these just makes you look like a hack.
