A new Bankrate survey provides more insight into why community colleges should strive to eliminate academic programs that lead to low-wage occupations. According to the survey, more than 50% of American households have less than 3 months of emergency savings. 22% of all Americans have no emergency savings at all.
Not surprisingly, personal income correlates to the amount of emergency savings a person has. Households with incomes less than $50,000 are more than seven times more likely to have no emergency savings than households with annual incomes of more than $100,000. At that threshold, only 5% of households have no emergency savings.
Even among households that have emergency savings of some duration, nearly 60% are uncomfortable with the amount of money they have set aside for emergencies. Among this group, fully one-third of respondents are “very uncomfortable” with their emergency savings amount. Another 24% of respondents are “somewhat uncomfortable” with their emergency cash.
Surprisingly, two-thirds of American households with household incomes as high as $75,000 are uncomfortable with their emergency savings. Two-thirds of survey respondents say they would need 6 months of emergency savings to feel comfortable. Despite this belief, only 30% of Americans have six months’ worth of savings on hand.
Savings (or lack of it) isn’t the only financial problem some Americans are facing. According to the survey, 36% of respondents said they had more credit card debt than emergency savings. The size of this group has increased by 14% since Bankrate’s 2022 survey.
Low wage occupations cause trouble now and later
More than one in eight respondents also said that while they had no credit card debt, they also had no emergency savings. While it is easy to think that the lack of savings coupled with the lack of credit card debt balances a person’s financial picture somewhat, according to Bankrate, this often describes a person with no access to revolving credit. In the absence of emergency savings, access to credit can help a person manage an unexpected expense. People whose personal income is too low to either save or have credit are in a very precarious financial position.
Lower incomes and lack of savings place these households under a lot of financial stress. By not developing academic programs that enable people to fill higher-wage jobs, community colleges contribute to the problem rather than alleviate it. Degree programs and non-degree certificates that do not substantially increase a worker’s earning potential do not act as a “steppingstone” to a better life. These programs are not a gateway to the middle class. In fact, they tend to keep people in low-wage occupations. Because their wages are so low, these workers cannot afford to spend time in a classroom, nor can they afford to divert financial resources away from their households. Instead of helping people escape poverty, community college degrees often become poverty traps.
That’s why it is imperative that community colleges weed out underperforming programs and replace them with those that lead to higher-wage employment. It’s unfortunate that our state legislature does not tie the amount of community college funding to their graduates’ earnings upon degree completion. By financially punishing schools that continue to pump out low wage graduates, the state legislature could transform Michigan’s community colleges into economic engines.
Photo Credit: Iain Farrell , via Flickr
