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In a pinch, could your family find $2,000?

A study finds half of families could not cope with an unexpected expense.

Matt Prather (left) and Kenneth Hamilton pawned an Xbox 360 on Friday at Springfield Pawn and Loan to help pay a cell phone bill. Staff photo by Marshall Gorby

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By Mark Fisher and Andrew McGinn, Staff Writers 12:14 AM Saturday, June 11, 2011

SPRINGFIELD — Matt Prather pawned an item Friday for the first time — an Xbox 360 to help pay his girlfriend’s cellphone bill.

“I’m trying to help her out,” Prather, 24, explained afterward at Springfield Pawn and Loan on East Main Street, a place brimming with everything from tools and instruments to mobility scooters and mounted deer heads.

A recent national study reveals the answer why business is booming at pawnshops.

Half of American families — including a growing portion of the country’s middle-class — would not be able to cope with an unexpected expense that required them to come up with $2,000 within 30 days, according to the study that illustrates both the fragile nature of family finances and the depth of the nation’s financial crisis.

“We’re like the canaries in the mine,” said Sam Beloff, managing partner of Rose City Fine Jewelry and Loan in downtown Springfield.

Area business owners, a credit-counseling official and an economist said the findings closely mirror the financial vulnerability that many Miami Valley families are grappling with.

A paper titled “Financially Fragile Households: Evidence and Implications,” published in May by the National Bureau of Economic Research, used data from a 2009 global economic crisis survey to document what the authors called “widespread financial weakness in the U.S.”

The researchers wanted to measure American families’ ability to access emergency funds, so they asked 2,148 people between 18 and 65 the question, “How confident are you that you could come up with $2,000 if an unexpected need arose with the next month?”

The amount of money and time frame reflects the cost of an unanticipated car repair, home repair, medical or legal expense.

More than a quarter of Americans (27.9 percent) reported that they would not be able to cope with such an expense, while another 22.1 percent responded that they probably would not be able to come up with the money.

The study’s authors conclude that financial hardship in America “is not limited to the poor or to a small group of the population” but instead extends to “those with higher-and-average income and higher educational attainment.”

The survey showed that while most people who said they could come up with $2,000 responded that they would withdraw from their savings, nearly one in five (19 percent) would sell some of their personal property to generate the cash and more than one quarter would do so “by resorting to what might be seen as extreme measures.”

Paul Cook, a sales associate at Max’s Jewelers and Loan on North Fountain Avenue, has seen more middle-class people than ever come in recently to pawn their belongings for money.

“People that normally wouldn’t have to pawn are pawning,” Cook said. “Every day, we have people come in here and say, ‘I’m 45 years old and I’ve worked all my life, and I just got a layoff notice.’ Even people who have jobs are getting their hours cut.”

Robert Premus, professor of economics at Wright State University, praised the study’s quality and credibility, and said he believes it accurately reflects the vulnerability of area families.

“People are running pretty scared right now,” Premus said.

Because a “recessionary climate” has extended for two full years, traditional sources of help for families who are struggling financially — other family members and friends — are themselves tapped out, and credit is still difficult to obtain from banks and other financial institutions, he said.

The nonprofit Consumer Credit Counseling Services, a division of Graceworks Lutheran Services, has provided help since 1980 to Miami Valley residents who have gotten in over their head, according to Terrie Krumal, the credit counseling organization’s education and marketing coordinator.

Counselors can help families or individuals develop a budget, manage debt or negotiate with lenders or creditors, and the organization offers confidential financial counseling, debt-management programs, housing counseling and bankruptcy counseling.

Krumal said the National Bureau of Economic Research study “fits right into the economic picture we’re seeing right now.”

Too many area residents are relying on credit cards and other forms of borrowing to serve as their safety net, “and when an emergency does hit, they’ve got no wiggle room,” she said.

“Most of it boils down to a lack of financial knowledge,” Krumal said. “People think they have their finances under control, but if they have an emergency, they find out they don’t.”

To get help from the Consumer Credit Counseling Services, call (937) 643-2227 or (800) 377-2432, or go to www.graceworks.org/cccs.

To view a summary of “Financially Fragile Households: Evidence and Implications,” published by the National Bureau of Economic Research written by Annamaria Lusardi of the George Washington School of Business, Daniel J. Schneider of Princeton University’s Department of Sociology and Peter Tufano of Harvard Business School, visit www.nber.org/papers/w17072.

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