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1 1 (February 12, 2021)

handle is hein.crs/govecex0001 and id is 1 raw text is: Congressional *.Research Service The $400 Question: Financial Insecurity and the COVID-19 Pandemic February 12, 2021 The economic disruption caused by the Coronavirus Disease 2019 (COVID-19) pandemic heightened awareness of household financial insecurity. Financial insecurity was not new for some households-they were financially insecure at the onset of the pandemic. Adults with children were disproportionately financially insecure. For some households, financial security improved between fall 2019 and summer 2020, following extraordinary economic relief provided in response to the disruptions caused by the COVID-19 pandemic. This Insight uses survey data on responses to the $400 question to analyze the above trends. The question asks those surveyed how they would finance an unexpected $400 expense. The Survey of Household Economics and Decisionmaking The Federal Reserve Board conducts an annual household survey, the Survey of Household Economics and Decisionmaking (SHED), which gauges the state of American households' finances and risks to their economic well-being. The first survey, conducted in 2013 in the shadow of the Great Recession, found that half of all adults said they could finance an unexpected $400 expenditure based on financial resources on hand during the current month: from available cash, from checking or savings accounts, or by placing the expense on a credit card and paying it off that same month. The other half of adults said they would finance the expense through other means, such as borrowing, selling an asset, or not immediately paying for the expense. Trendsin Financing an Unexpected $400 Expense During the economic expansion that ended in early 2020, the percentage of adults who responded that they would cover an unexpected $400 expense based on financial resources on hand increased. In fall 2019, that percentage stood at 63%. The year 2019 was the last full year of the longest economic expansion on record, with employment rates for prime-age workers near their historical peak and estimated poverty rates at their lowest point observed since 1959 (the first year the measure was available). In fall 2019, 36% of adults said they would finance an unexpected $400 expense by borrowing, selling an asset, or not immediately paying for the expense. Congressional Research Service https://crsreports.congress.gov IN11602 CRS INSIGHT Prepared for Membersand Committeesof Congress

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