According to the Federal Reserve’s study on economic well-being in U.S. households, published in 2016, Americans are satisfied with how they are doing financially. The number of adults reporting they are “living comfortably” or “doing okay” rose to 69%, up from 65% in 2014 and 62% in 2013. However, surveyors then asked a series of follow-up questions that called into serious question what most Americans perceive as comfortable. For example, 46% of study participants admitted that if an unexpected expense costing $400 arose, they would be unable to pay for it without selling property or borrowing money. Of the 22% of respondents who incurred an unexpected medical expense over the previous year, nearly half, or 46%, still had debt from that expense.
It’s difficult to rationalize the impressions mo sample st Americans have of their financial situations with actual numbers. Simple math indicates sizable overlap among those who claim they are doing fine financially, yet could not pay out of pocket for a basic car repair. This calls into question whether $400 in savings can support a comfortable existence. It also raises other interesting questions, such as how much in savings is truly sufficient to be financially secure, and how this number may vary based on a person’s stage of life and living standards.
Minimum Savings for Comfortable Living
Financial guru Dave Ramsey, who advocates debt-free living and financial security, advises $1,000 in the bank as a starting point for clients who are destitute or currently have no savings. This sum, though insufficient to live on for long if an income loss occurs, at the very least prevents a car breakdown or minor medical mishap from causing a financial disaster. Despite the high level of financial security self-reported by the majority of Americans, nearly half lack this basic first step for an emergency fund.