You need $1,400 to meet today’s emergency expense, report finds

Photo (c) Sky Nesher - Getty Images

Inflation is making emergencies a lot more expensive

When the Federal Reserve issues its annual "Economic Well-Being of U.S. Households” report it always measures how many households have enough cash on hand to meet an emergency $400 expense.

But these days, very few emergency expenses cost just $400. LendingClub Corporation, in partnership with, has issued its own state of American households report and finds the Fed’s calculations are seriously out of date.

The report found that 46% of U.S. consumers have faced at least one unexpected expense in the last 90 days, with 56% of those emergency expenses costing more than $400. In fact, consumers' average emergency expense was more than triple that -- approximately $1,400.

"The need to update the $400 emergency expense benchmark is evident in this report," said Anuj Nayar, LendingClub's financial health officer. "Inflation in the last year, let alone the last decade, has made it much more difficult for consumers to save while staying on top of their expenses.”

The report confirmed recent findings that well over half of U.S. households live paycheck-to-paycheck. By spending everything they make, even upper-income households are saving little to nothing each month.

‘Difficult road ahead’

“Not only are consumers saving less every month, but they are likely to encounter an emergency expense, if not multiple, putting them at a greater risk for increased financial hardship,” Nayar said. “This fact paves a financially difficult road ahead for consumers."

After quizzing consumers about their unexpected bills, the researchers found very few expenses were under $400. Emergency expenses in 2021 averaged around $1,400 with high-income households and those actually saving money each month reporting even high unexpected expenses.

“With rising inflation and the increased cost of emergency expenses, the Federal Reserve's indicator of financial distress for over a decade is losing relevance,” the researchers write.   

High-income households might have more assets to draw upon to meet an unexpected bill. Middle to lower-income households are less likely to have that option, having to resort to credit cards or other high-interest loans.

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