Vast majority of households can handle a $400 emergency

A new report from the JPMorgan Chase Institute reveals that the vast majority of US households can cope with a modest financial shock.

According to the report, which analyzed data from 5.9 million households, 90 percent of US households are equipped to manage a $400 unexpected expense using some combination of cash, disposable income, and credit.

With over half of Americans believe the country is currently in a recession, according to JPMorgan, the report suggests that evaluating the economy based on living costs rather than top-down macroeconomic signals is crucial, particularly since prices for many essential goods remain above pre-pandemic levels.

“Recent economic data has revealed conflicting perspectives about how Americans are faring financially, and how they view the health of the US economy,” Chris Wheat, president of the JPMorgan Chase Institute, said in a statement.

“Understanding the full picture of household liquidity is essential to accurately evaluating the financial resiliency of both consumers and communities,” Wheat said.

Among other key findings, the report found most households possess sufficient liquidity to manage moderate expense shocks, often relying on sources beyond cash savings.

According to the data, 92 percent of households can cover a $400 emergency using cash savings, disposable income, or short-term credit. Among low-income households, that percentage drops drastically to 77 percent, with many depending more on disposable income or credit than cash on hand.

The report found access to credit is a critical factor for low-income families, suggesting that 43 percent of these households might cope better with increased credit availability.

The report also mirrored other research on racial disparities, with Black and Hispanic households relying more on disposable income and credit, while Asian and White households are 10 percentage points more likely to use cash they’ve set aside for a $400 emergency.

From an age perspective, the research found older households generally have higher cash reserves but are still less able to cover an unplanned $400 expense due to lower disposable income. Overall, the study found 87 percent of the oldest households can manage, compared to 94 percent of middle-aged and 95 percent of younger households.

The proportion of households unable to handle a $400 emergency has remained stable in recent years, the report said, with notable seasonal variations around tax time when households typically increase their cash balances.