Middle class, but "asset poor"
We learned from the Census Bureau this week that the federal poverty rate has fallen, albeit slightly, for the first time since 2006. Last year, 14.5 percent of people in this country earned less than the federal poverty line, down from 15 percent in 2012. But a new report out Wednesday says far more families are financially insecure.
Nearly half of households in major U.S. cities are “liquid asset poor,” according to the report from the nonprofit Corporation for Enterprise Development (CFED) and Citigroup. That means if they lose their incomes, those households don’t have enough accessible savings to get by for three months at the federal poverty level.
“Liquid poverty tells us that many communities and families that may be middle class really don’t have the cash available, the liquidity available, to respond to unexpected emergencies or needs,” says Bob Annibale, Citigroup’s global director of community development.
Worse off is Newark, NJ, with nearly 75 percent of households considered liquid asset poor. When so many families lack a financial cushion, it takes a toll on the whole economy, says Stephanie Hoopes Halpin, an assistant professor at the School of Public Affairs and Administration at Rutgers University-Newark.
“What it means is that a huge portion of your community is struggling just to pay their bills,” she says.
The report is being presented at a conference in Washington, D.C. aimed at helping more low-income families save. Solutions include automatic savings plans “so that people don’t have to think about it every time they need to save a dollar,” says Ida Rademacher, chief program officer at CFED, or helping people pay off debts so that they can begin saving.
Lower-income households can and will save, she says, if given the right opportunities.
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