“Paycheck-to-Paycheck” and Five Other Popular Myths
10th December 2024
The claim that “60% of Americans live paycheck-to-paycheck” comes from a survey by the fintech company LendingClub. The company refuses to release its survey methodology, but we can get a general idea from its website, which says: “For those Americans, [living paycheck to paycheck] means that they need their next paycheck to cover their monthly financial outflows.” So what LendingClub is probably claiming is that around 60% of Americans don’t have enough cash in their bank accounts to live off of for one month.
But LendingClub’s survey is probably just flat-out wrong about this. The Federal Reserve does a very careful annual survey called the Survey of Household Economics and Decisionmaking, or SHED.1 This survey asks whether people have a “rainy-day fund” sufficient to cover at least three months of expenses. And it pretty consistently finds that over half of Americans do have such a fund
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If more than half of Americans have enough money to cover three months of expenses if they lose their job, then mathematically it cannot be true that 60% of Americans lack enough money to cover just one month of expenses.
It ain’t what you know, it’a what you know that ain’t so.