A record 68% of American households said their savings could cover a $400 emergency in 2021
Last year was a stellar year for many American households: Financial well-being hit an all-time high in 2021, as did the proportion of households who said their savings could cover a $400 emergency, according to the Federal Reserve .
At the end of 2021, 78% of adults said they were either doing well or financially comfortable, according to the Fed's annual report on the economic well-being of US households. That's the highest percentage since the Fed began surveying in 2013. Additionally, 68% of households said they could cover a $400 emergency expense with cash or equivalent, the highest proportion the survey has ever recorded, and a 64% increase by the end of 2020.
“This increase in financial well-being is consistent with improved economic conditions and the additional relief provided by Covid-19
Measures enacted in 2021," the report said, citing the American Rescue Plan (ARP), which sent out a third stimulus check to most families, increased Supplemental Nutrition Assistance Program benefits, and reduced the child tax credit other measures significantly increased for many families.
The Fed's report is based on its ninth annual Survey of Household Economics and Decision Making, conducted in October and November 2021.
The report finds that financial well-being has increased across all racial and ethnic groups measured in the survey. Parents in particular have seen large gains in financial well-being over the past year, with around 75% saying they are at least financially healthy, an increase of 8 percentage points from 2020. However, there was a significant disparity in well-being by educational level: 91% of those adults with at least a bachelor's degree said they were at least okay financially, compared to 49% of those with less than a high school degree.
Whether households can afford a $400 emergency is often used as a barometer of financial health in the US.
While this is promising news, the Fed notes that its survey was conducted ahead of the latest Omicron variant of the Covid-19 virus and "other changes in the economic landscape in recent months." That may be obscuring some less than cheerful financial news.
Indeed, government data and other financial reports recently revealed that the US savings rate and household savings are steadily declining, thanks to a combination of inflation, increased consumer spending and other factors. Additionally, many of the federally sponsored pandemic-era benefits for individuals have expired, including improved unemployment benefits and the improved child tax credit, which could impact the percentage of Americans who say they are doing well financially.
Some of these measures are still ongoing, such as the suspension of federal student loan payments and interest accrual.
Still, not all households are doing well: 16% said they were "just making ends meet", while 6% said they "find it difficult to make ends meet". Just over 10% of adults said there was no way they could pay for a $400 emergency.
This story was originally published on Fortune.com
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