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The $400 Emergency Expense is Dead

Long live the $1,400 emergency expense.

New research suggests that the decade-old $400 emergency expense has more than tripled.

Since 2013, the Federal Reserve has tracked consumer ability to afford a theoretical $400 emergency expense, but things have changed.

A new study from LendingClub tracks U.S. consumers who live paycheck to paycheck.

According to new data, 46% of U.S. consumers have faced at least one unexpected expense in the last 90 days.

The average emergency expense was about $1,400, everything from car repairs (the most popular) to health care costs and unforeseen housing expenses.

The report also found that 59% of U.S. consumers live paycheck to paycheck, including an increasing number of high-income individuals.

About 43% of consumers earning $100,000 or more annually are living paycheck to paycheck, which is up almost 10%.

The study also found significant differences across generations and income brackets.

Middle-aged and high-income consumers are more likely to face emergency expenses, likely because they have more stuff to break. 

While 53% of bridge millennials and 51% of millennials faced unexpected expenses in the last 90 days, only 45% of Generation Z consumers and 40% of baby boomers and seniors had a similar experience. 

Additionally, 56% of consumers earning more than $200,000 annually were forced to pay for at least one emergency expense, whereas 39% of those earning less than $50,000 annually had to do the same. 

With rising inflation, it might be time for the Federal Reserve to update its metrics, or its old indicator just might become irrelevant.

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