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A record 68% of American households said their savings could cover a $400 emergency in 2021

May 23, 2022, 6:32 PM UTC

Last year was a banner year for many American households: Financial well-being reached an all-time high in 2021, as did the share of households that said they could cover a $400 emergency with their savings, according to the Federal Reserve.

At the end of 2021, 78% of adults reported either doing okay or living comfortably financially, per the Fed’s annual Economic Well-Being of U.S. Households report. That’s the highest percentage since the Fed began the survey in 2013. Additionally, 68% of households said they could cover a $400 emergency expense using cash or its equivalent, the highest share the survey has ever recorded, and up from 64% from the end of 2020.

“This increase in financial wellbeing aligns with improved economic conditions and the additional Covid-19 relief
measures enacted in 2021,” the report reads, pointing to the American Rescue Plan (ARP), which sent out a third stimulus check to most families, increased Supplemental Nutrition Assistance Program benefits, and significantly increased the child tax credit for many families, among other measures.

The Fed’s report is based on its ninth annual Survey of Household Economics and Decision Making, conducted in October and November 2021.

The report finds that financial wellbeing increased among all the racial and ethnic groups measured in the survey. Parents, in particular, saw large gains in financial wellbeing last year: around 75% said they were doing at least okay financially, up 8 percentage points from 2020. That said, there was a significant discrepancy in wellbeing by education level: 91% of adults with at least a bachelor’s degree reported being at least okay financially, compared to 49% of those with less than a high school degree.

Whether households can afford a $400 emergency is often used as a barometer of financial health in the U.S.

While this is promising news, the Fed notes its survey occurred before the recent Omicron variant of the Covid-19 virus and “other changes to the economic landscape in recent months.” That potentially masks some less cheery financial news.

Namely, that government data and other financial reports have found recently that the savings rate in the U.S. and the amount households have in savings are steadily declining thanks to a combination of inflation, increased consumer spending, and other factors. Additionally, many of the federal government-sponsored, pandemic-era benefits for individuals have expired, including enhanced unemployment benefits, and the enhanced child tax credit, which could impact the percentage of Americans who say they are doing well financially.

Some of these measures are still ongoing, like the pause on federal student loan payments and interest accrual.

Still, not all households are faring well: 16% reported they are “just getting by,” while 6% said they are “finding it difficult to get by.” Just over 10% of adults said they could not pay for a $400 emergency by any method.

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