America’s ‘Wealthy Hand-to-Mouth’ Residents [AUDIO]
“At the end of the pay period, there’s just no money left over for unexpected expenses,” said Greg Kaplan, the study’s co-author and an assistant professor of economics at Princeton University. “Their regular consumption expenses basically take up all of their regular income.”
Middle class families, for the purpose of the Brookings study, are ones who earn a median income of $41,000, but hold substantial illiquid assets.
Kaplan said a number of these families own a home and/or retirement account, from which the cash is not immediately available. The return on these assets can be substantial in the end, but Kaplan said for now, the “hand-to-mouth” families are choosing to forgo the on-hand cash reserves.
This type of status is “transient,” according to the study, and the average family would climb out of this cycle in less than three years.