Six Resources Used by the Poor for Emergency Bills

Although the payday lenders would prefer that it was otherwise, poor people have plenty of better options for getting past a short-term cash emergency.

It turns out that people without liquid assets still have a means of getting by. A bit of research from George Washington University listed the six most common ways that participants in their survey said that they “get by.” These choices are listed in order of their frequency. Savings, for example, is the most common answer. The survey included the rich and poor. The question: “If you were to face a $2,000 unexpected expense in the next month, how would you get the funds you need?”

1. Savings
2. Friends and family
3. Credit cards or another source of traditional consumer credit.
4. An alternative financial product. This includes payday loans, refund anticipation loans, auto title loans, and pawn shops.
5. Get more hours at work, or take a second job.
6. Sell possessions

There were 2,148 respondents. I think these comments tell us that people are smart enough to see past the next thirty days. I wish that more people considered getting more hours, of course, but that is a hope that needs to be reconciled with the reality that employment and under-employment are real problems in our economy.

Going back to the research, there are a few other interesting conclusions:

A payday loan is not the first choice: Most poor households never have to call on an alternative financial service (“AFS”). FINRA says that 69 percent of households with less than $25,000 in assets have never used any AFS of any kind.

Poor people are not the only folks that would not be able to put their hands on a spare $2,000. Almost one of every four households earning between $100,000 and $150,000 would not be able to get through the month.

The number of financially fragile households is very high: Half of America lives without the financial security needed to weather this kind of event. Fully 28 percent of households say that they would never be able to find $2,000 and another 22 percent said that it would be highly unlikely. Only 24 percent said that they would have no trouble finding the resources to cover it.