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Paying for the Unexpected: Making the Case for a New Generation of Strategies to Boost Emergency Savings, Affording Contingencies, and Liquid Resources for Low-Income Families

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A Fragile Balance

Abstract

Low-income households’ accumulation of liquid savings is an important and growing issue, and one that has not yet attracted significant attention in the United States. Financial advisors commonly recommend that people have three to six months of income as liquid savings, stored as cash, demand deposits, or other funds that can be accessed within a few days. This rule of thumb is based at least in part on the fact that it could take three to six months to find a new job in case of unemployment, and liquid funds can provide an emergency safety net for this period (Chang, Hanna, and Fan 1997). However, for lower-income families, a three-month savings cushion is difficult to accumulate. As these households face lower incomes and higher relative costs for housing, transportation, food, and other essentials, just making ends meet is a challenge.

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J. Michael Collins

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© 2015 J. Michael Collins

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Collins, J.M. (2015). Paying for the Unexpected: Making the Case for a New Generation of Strategies to Boost Emergency Savings, Affording Contingencies, and Liquid Resources for Low-Income Families. In: Collins, J.M. (eds) A Fragile Balance. Palgrave Macmillan, New York. https://doi.org/10.1057/9781137482372_1

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