10 states where families are living on the financial edge
More than two in five American households don't have enough of a safety net to exist at the poverty level for three months if their income suddenly disappears
If you lost your job, or your spouse or child suddenly got sick, how would you manage financially? Well, for too many Americans with little saved up in cash or other liquid assets, that kind of crisis could spell financial devastation.
The phrase "liquid asset poverty" doesn't exactly roll off the tongue. Nor does the obtuse wording intuitively convey the grim financial message that lies at the heart of it. The term was coined by the Corporation for Enterprise Development, or CFED, a non-profit that works to increase financial security for low-income families.
It means having insufficient liquid assets — those that can quickly and easily be converted to cash-in-hand, like checking and savings accounts, stocks, mutual funds and IRAs — to exist at the poverty level for three months in the event of loss of income. More simply, it means not having enough money to pay the bills in the event of any kind of household financial crisis, whether that be the layoff of a primary wage earner or something equally financially debilitating, like an unforeseen medical bill. For a family of four in 2011, liquid asset poverty meant having less than $5,887 available to see them through three months without income.
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That isn't much money, but according to a scorecard compiled by the CFED, 43.5 percent of American households don't have enough of a safety net to meet even this bare-subsistence threshold. In Alabama and Mississippi, more than 60 percent of households don't meet it, based on 2011 data. In Nebraska and Iowa — two of the states with the lowest percentage of households in liquid asset poverty —more than a quarter of households fall short.
For the richest nation in the world, these statistics are worrisome, a fact not lost Janet Yellen, chair of the Federal Reserve. The central bank tracks household wealth and balance sheets, and it recently reported that the overall net worth of U.S. households rose to a record $81.5 trillion in the second quarter of the year. Those gains, though, have not been spread across the income spectrum — and the median household net worth has fallen 2 percent since 2010.
"We have come far from the worst moments of the crisis, and the economy continues to improve," Fed Chair Janet Yellen said in a recent speech to the CFED, "but the effects of the recession are still being felt by many families, particularly those that had very little in savings and other assets beforehand."
Americans are also famous non-savers, which didn't help matters when the economy nose-dived and the housing market collapsed.
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10. Texas
Nearly half of Texas households, 49.8 percent, lack a cash cushion that can keep them at the poverty level for three months in the event they lost their income, according to the Corporation for Enterprise Development. Also, 12.8 percent are unbanked, meaning that they don't have either a checking or savings account. Another 27.2 percent are "underbanked," meaning that they may have a bank account but also use wallet-busting alternative banking methods like payday lenders. As a point of reference, 8.2 percent of households nationally are unbanked and 20.1 are underbanked.
9. Louisiana
Laissez les bon temps rouler? About half of Louisiana households (49.9 percent) are ill prepared for a financial shock that could bring those good times to an end, according to CFED, while 11.5 percent are unbanked and 27.2 percent are underbanked.
8. Tennessee
Half of Tennessee households are liquid asset poor, while 10.9 percent are unbanked and 18.1 percent are underbanked.
7. North Carolina
A financial shock like the loss of a job or a medical emergency would leave 51.5 percent of North Carolina households without enough resources to cover basic expenses, according to the CFED Assets and Opportunity Scorecard. The report also says 9.3 percent of households in the state are unbanked, and 21.7 percent are underbanked.
6. Arkansas
The CFED report says 51.9 percent of Arkansas households are liquid asset poor, while 12.3 percent are unbanked and 28.1 percent are underbanked.
5. Kentucky
More than 52 percent of Kentucky households are liquid asset poor, while 9.9 percent of households in the Bluegrass State are unbanked and 21.5 percent are underbanked.
4. Nevada
If their luck takes a bad turn, 55.6 percent of Nevada households wouldn't have enough in liquid assets to cover their basic needs for three months. Also, 7.5 percent of households are unbanked and 31.2 percent are underbanked.
3. Georgia
Georgia ranks third lowest on the CFED list with 55.8 percent of households in the state meeting the criteria for liquid asset poverty. The report also says that 11.5 percent of households in the state are unbanked and 26.8 percent are underbanked.
2. Mississippi
Nearly 62 percent of Mississippi households don't have a enough in liquid assets to get through a financial crisis for three months, while 15.1 percent of its households are unbanked and 23.6 percent are underbanked.
1. Alabama
At 62.7 percent, Alabama has the highest percentage of households threatened by a financial shock. Further, 10.2 percent of its households are unbanked and 28.8 percent of its households are underbanked.
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