Study: 38 million wealthy U.S. households living ‘hand-to-mouth’

It seems a household living from one paycheck to the next isn’t just for the lower- and middle-class. A new study has discovered that a large number of affluent homes are living in the same kind of predicament: no savings, no investments, no rainy day fund.

Greg Kaplan and Justin Weidner of Princeton University and Giovanni Violante of New York University, published a paper entitled “The Wealthy Hand-to-Mouth” in which it was found that 38 million American households are living paycheck to paycheck.

The economists discovered that wealthy hand-to-mouth households maintain at least $50,000 in illiquid assets, including homes, vehicles and retirement accounts, but the problem is that they’re inaccessible. Essentially, wealth households account for roughly two-thirds of the entire hand-to-mouth households in the country, a number that immensely outweighs the poorest.

“The wealthy ‘hand-to-mouth’ are households who hold little or no liquid wealth (cash, checking and savings accounts), despite owning sizable amounts of illiquid assets,” the study said.  The high costs of college and other bills that stretch a family’s paycheck thin are some of the causes of being stuck in a paycheck to paycheck situation.

According to the data, these wealthy “poor” households are older, better educated, more likely to be married and earn a higher income than their poorer counterparts.

Wealthy hand-to-mouth households usually don’t last long. It is estimated that this occurs for 2.5 years and then either they move upwards to a wealthier status or they become completely impoverished.

The study authors concluded that the government’s stimulus measures are aimed at the poor, but the unintended consequences actually help those who are better off as well.

The surprising results aren’t just confined to the U.S., but can also be located in Canada, the United Kingdom, Germany, Italy, France, Spain and Australia.

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