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Researchers : Coming Up with Cash in a Pinch: Emergency Savings and Its Alternatives
Complete Description:This paper addresses the important issue of the savings that people use in response to unexpected expenses. This savings, which we refer to as emergency savings, serves as a form of insurance against non-routine expenditures such as a car repair or unforeseen medical expense. Failing to adequately save is a common occurrence, especially for low and moderate income households. Without easy access to liquid savings, people to turn to other alternatives; including short-term credit, friends and family and potentially even public subsidy programs. People may fail to save for an emergency because they lack financial knowledge, fail to adequately assess the risk of an emergency or simply because they procrastinate. Other barriers to saving include asset tests in public benefit programs as well as a lack of access to useful savings account products. Ultimately people without emergency savings will turn to alternatives when they need immediate liquid financial resources. This paper reviews over 80 articles addressing the issue of savings and alternative mechanisms of liquidity for households. A number of articles address savings models or general theories of savings; far fewer focus on emergency savings and expenditure shocks, indicating an opportunity for future research. The review finds a great deal of research about payday lending and other alternative credit mechanisms for consumers. A number of these studies address the need for low cost alternative credit for consumers without available emergency savings
Date Published:Wednesday, June 1, 2011
Author:Stephanie Chase, Leah Gjertson, and J. Michael Collins
Funding Agency: Social Security Administration, CFS - Wisc
Type: Working paper;
Source: Literature review;
Language: English
Audience: Researcher