Whoo-Weeee! Snapchat, Instagram, Facebook, gadgets, electronic toys, Millennials own them all and play with them in Mom’s basement. But can they pay the rent on their own house, apartment? Pay for their car? Do they have a bank account? What are they going to do with those college loans?
They’re not the only ones with this problem but they make up the large part of the group.
“The Reality Is, Half Of Americans Can’t Afford To Write A $500 Check”
The CEO of Assurant appeared on Bloomberg TV to explain why demand for his services is likely to increase: the chief executive of the mobile phone insurer said he expects a surge in demand as carriers charge customers more to replace their devices. “If you think back five years ago, you as a consumer didn’t know how much that phone cost, you thought it was free or close to free,” Assurant’s Alan Colberg said Monday. “Now you’re paying $600, that’s a lot. So we’ve actually seen the attachment rate, or the number of people buying the product, going up a little bit in the last couple of years.”
He then proceeded to give Bloomberg his traditional sales pitch: Assurant is counting on growth at its business covering phones and appliances to help counter a decline in the segment that insures foreclosed homes for lenders. While improvement in the real estate market has limited the number of vacant homes, Colberg said there are still many cash-strapped consumers.
It is what he said next that caught our attention: “The reality is, half of Americans can’t afford to write a $500 check,” Colberg said. He spun that stunning statistic by saying that when US customers sign up for a cellular plan, they’re willing to buy protection in case “they lose that phone or something happens to it.”
In other words, there are millions of Americans who don’t have $500 in the bank but are willing to dish out more than that on a cell phone, and then are stupid enough to make monthly payments that ultimately end up being far higher than $500 to protect their purchase… which they clearly couldn’t afford in the first place.
That said, we decided to look into the CEO’s claim about the woeful state of US finances. What we found is that according to a recent Bankrate survey of 1,000 adults, 57% of Americans don’t have enough cash to cover a mere $500 unexpected expense. Turns out the CEO was right. And while that may appear dire, it is a slight improvement from 2016, when 63% of U.S. residents said they wouldn’t be able to handle such an expense. [snip]
Putting the numbers in context: despite steady job growth during the Obama administration – which have been focused on minimum wage industries – wages have been predictably slow to recover, with the typical American household still earning 2.4% below what they brought home in 1999, when income peaked. Meanwhile, costs for essentials such as housing and child care have surged faster than the rate of inflation, placing stress on household budgets and making the accumulation of wealth, i.e., savings, impossible.
The bottom line: About four out of 10 Americans said they had enough in savings to cover a surprise $500 expense. Another 21% said they would rely on a credit card, while 20% said they’d cut back on other expenses. Another 11% said they’d turn to family or friends for the money.