A new survey conducted by LendingClub Corporation reveals that Americans are experiencing a decline in their financial well-being. The survey found that expenses are increasing while savings are dwindling, indicating that Americans are getting poorer. The survey challenges the Federal Reserve's benchmark of a $400 emergency expense, which has remained unchanged for 10 years. According to the survey, two-thirds of unexpected expenses cost more than $400, with 41% spending double that amount or more. The average emergency expense was approximately $1,700, showing a year-over-year growth of 16%.
The study conducted by LendingClub and PYMNTS demonstrates the surge in unexpected expenses for consumers. Alia Dudum, a money expert with LendingClub, argues that the $400 benchmark is no longer accurate due to inflation and the macroeconomic volatility caused by the pandemic. She highlights that nearly half of U.S. consumers faced unexpected emergencies, with the cost averaging $1,700. Dudum questions whether consumers are adequately prepared for future emergencies as their frequency and costs continue to rise.
The study also examines the impact of age on preparedness for unexpected expenses. It found that millennials and high-income consumers face unexpected emergencies at higher rates. Affluent consumers who own vehicles and homes are more likely to face necessary repairs and replacements. Furthermore, the study reveals that inflation affects emergency expenditures, pushing the average spend well above the Federal Reserve's benchmark.
To better prepare for unexpected financial needs, Dudum suggests several steps individuals can take. These include building and regularly contributing to an emergency fund, minimizing debt, seeking opportunities to enhance savings through high-yield accounts, and reviewing insurance coverage. These measures can help individuals gain control over their spending, build emergency savings, pay off debts, and ensure adequate coverage for emergencies.
In conclusion, the survey conducted by LendingClub Corporation highlights the increasing financial strain on Americans. It challenges the outdated $400 benchmark for emergency expenses and emphasizes the need for individuals to take proactive steps to improve their financial well-being.