In a pinch, half of U.S. families can’t find $2,000

David Berke, president of Rich's Pawn Shop works behind one of the jewelry counters in the shop at 709 Watervliet Ave. Bertke said Rich's has seen

Jan Underwood David Berke, president of Rich's Pawn Shop works behind one of the jewelry counters in the shop at 709 Watervliet Ave. Bertke said Rich's has seen "a lot of customers" in recent months as people struggle to stay afloat during tough economic times.

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By Mark Fisher, Staff Writer Updated 10:54 AM Saturday, June 11, 2011

Half of American families — including a growing portion of the country’s middle-class — would not be able to cope with an unexpected expense that required them to come up with $2,000 within 30 days according to a study that illustrates both the fragile nature of family finances and the depth of the nation’s financial crisis.

Dayton-area business owners, a credit-counseling official and a local economist said the findings from the study closely mirror the financial vulnerability that many Miami Valley families are grappling with.

A paper titled “Financially Fragile Households: Evidence and Implications,” published in May by the National Bureau of Economic Research, used data from a 2009 global economic crisis survey to document what the authors called “widespread financial weakness in the U.S.”

The researchers wanted to measure American families’ ability to access emergency funds, so they asked 2,148 people between 18 and 65 the question, “How confident are you that you could come up with $2,000 if an unexpected need arose with the next month?” The amount of money and time frame reflects the cost of an unanticipated car repair, home repair, medical or legal expense.

More than a quarter of Americans (27.9 percent) reported that they would not be able to cope with such an expense, while another 22.1 percent responded that they probably would not be able to come up with the money.

When asked the same question posed to the national survey respondents, Amy DeMordaunt, 43, of Beavercreek, said she “probably could” come up with $2,000 within 30 days — but would likely obtain it by not paying off her entire credit card bill.

“I wouldn’t want to do it that way, but I probably would,” DeMordaunt said.

DeMordaunt’s response mirrors those in the survey who suggested they would resort to measures that personal-finance experts don’t recommend in order to cope with a financial emergency.

The study’s authors conclude that financial hardship in America “is not limited to the poor or to a small group of the population” but instead extends to “those with higher-and-average income and higher educational attainment.”

The survey showed that while most people who said they could come up with $2,000 responded that they would withdraw from their savings, nearly one in five (19 percent) would sell some of their personal property to generate the cash and more than one quarter would do so “by resorting to what might be seen as extreme measures.”

David Bertke, president of Rich’s Pawn Shop at 708 Watervliet Ave. in Dayton, said he sees evidence of the study’s conclusions every day in his Belmont pawn shop.

“We have met a lot of new customers,” Bertke said. “A lot of people who never thought they would ever need to do this” are coming in to sell tools, electronics and other household items. Meanwhile, some of the pawn shop’s regular customers who have been coming in sporadically for years haven’t been seen for a while — they’re either tapped out or they’ve moved elsewhere to look for work, Bertke said.

Similarly, Plato’s Closet at 2476 Commons Blvd. near the Mall at Fairfield Commons in Beavercreek, which buys used brand-name closing and accessories, has seen an increase in the number of people coming in to sell, according to store manager Julie Kerstanski, who said those selling items appear to come from a wide range of economic backgrounds. And Kertanski’s not just seen an increase in interest from those looking to sell goods — there’s been an increase in customers looking for values. The business will expand later this month when it moves to a new location at 2750 N. Fairfield Road that is about twice the size as the existing store.

Robert Premus, professor of economics at Wright State University, praised the study’s quality and credibility, and said he believes it accurately reflects the vulnerability of Dayton-area families.

“People are running pretty scared right now,” Premus said. Because a “recessionary climate” has extended for two full years, traditional sources of help for families who are struggling financially — other family members and friends — are themselves tapped out, and credit is still difficult to obtain from banks and other financial institutions, he said.

The nonprofit Consumer Credit Counseling Services, a division of Graceworks Lutheran Services, has provided help since 1980 to Miami Valley residents who have gotten in over their head, according to Terrie Krumal, the credit counseling organization’s education and marketing coordinator. Counselors can help families or individuals develop a budget, manage debt or negotiate with lenders or creditors, and the organization offers confidential financial counseling, debt-management programs, housing counseling and bankruptcy counseling.

Krumal said the National Bureau of Economic Research study “fits right into the economic picture we’re seeing right now.” Too many Dayton-area residents are relying on credit cards and other forms of borrowing to serve as their safety net, “and when an emergency does hit, they’ve got no wiggle room,” she said.

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