For many people, life is a series of small emergencies. And without the resources to solve them, they can turn into big ones, fast.
Based on interviews with more than 100 Americans about their financial histories, Rachel Schneider, an economics expert who co-wrote The Financial Diaries: How American Families Cope in a World of Uncertainty with Jonathan Morduch, found that families’ spending patterns month-to-month were lumpy and jagged, as they tried to address whatever size emergencies came up: the broken-down cars, the medical bills, the cancelled shifts. But budgets are tight. Forty percent of Americans can’t easily cover an unexpected $400 expense, the Federal Reserve Board estimates; another survey, by the personal finance website Bankrate, more conservatively found that 40 percent couldn’t cover a $1,000 expense.