woman at computer holding paper and looking dismayed Even though some households may have themoney in savings, it is often already earmarked for another bill.(Photo: Shutterstock)

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They say it's a strong economy. They remind us that theunemployment rate is the lowest it's been in decades. So why do somany households say they'd be up the creek if hit with a surprisebill of just $400?

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According to a brief from the Center for Retirement Researchat Boston College, debt could be the reason. In fact, 41 percent ofhouseholds say that if confronted by an unexpected expense of $400, they'd have a toughtime covering it—despite the fact that some of them may actuallyhave that much set aside in checking or savings accounts.

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That money is likely already earmarked to pay another bill, saysthe report, and it doesn't matter whether the household is middleincome or higher income. Researchers checked that aspect of theproblem and found that 17 percent of households with more than$100,000 in income said they'd have problems covering that $400bill.

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While it's true that according to Survey of Consumer Financesdata only 1 percent of those higher-income households have lessthan $400 available for a surprise bill—about 20 percent ofhouseholds are in that position, and they're mostly among thelower-income crowd—that doesn't mean that what money they haveisn't already committed elsewhere, to, say, an unpaid credit cardbill.

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Says the report, "Even though households in the second group[those that would have less than $400 in cash once they paid offtheir credit cards (17 percent)] technically have enough cash onhand to cover a $400 expense, they may mentally allocate theamounts in their checking/savings accounts to paying off creditcard debt, where rates are high on unpaid balances."

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It's not a question of financial literacy, either, sayresearchers, since they actually tested the level of financialliteracy among the three groups—those who say they can't pay that$400 bill, those who really can't pay it and those who can—andfound very little difference among them.

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There was a difference, however, in levels of education, withthose on the low end of the education scale (lacking a collegedegree) also on the low end of the financial scale.

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There are three basic groups who are unable to cover thatunexpected $400 expense: the group with low income, the group withdebt—credit card debt, student loans and installment loans—and thegroup with mortgages. But debt is the overriding factor, andcrosses income lines.

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READ MORE:

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Stress from debt affects not just health butcognitive functions

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Wiping out student debt helps everyone win, saysSanders's economist

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Marlene Satter

Marlene Y. Satter has worked in and written about the financial industry for decades.