37% of Americans Say They Couldn’t Pay a $400 Surprise Expense in Cash, Federal Reserve Data Shows

Imagine your car suddenly needs a $400 fix, your refrigerator quits, or an unexpected medical bill shows up in the mail. For some households, that kind of expense is manageable with savings. For many others, it could mean turning to credit, borrowing money, or delaying another payment.

Recent Federal Reserve data highlights how exposed many family budgets still are.

In the Federal Reserve’s 2025 Survey of Household Economics and Decisionmaking, released in 2026, 37% of American adults said they would not pay an unexpected $400 expense entirely with cash or cash-like funds.

That figure does not necessarily mean everyone in that group has no savings, but it does point to ongoing concerns about emergency preparedness and household finances.

What the Fed Found

The survey, conducted among American adults, looked at financial conditions, savings, and how people handle surprise costs. Researchers found that 63% would cover a hypothetical $400 emergency with cash, savings, or a credit card paid in full at the next statement.

That leaves 37% who would take some other route, such as borrowing money, carrying credit card debt, selling something they own, or being unable to pay. The Federal Reserve also noted that some respondents may have had enough savings but simply chose not to use them for that expense. So the results show financial fragility, but they do not prove every person in that 37% group had less than $400 available.

12% Said They Couldn’t Pay at All

One of the most concerning findings was the share of adults who said they could not cover an unexpected $400 bill by any means. The Fed reported that 12% fell into that category, slightly below 13% the previous year.

That difference matters. Being unable to pay at all is very different from deciding to borrow or use credit. If a needed car repair keeps you from getting to work, and you have no savings, no available credit, and no one to help, even a relatively small emergency can threaten employment, housing stability, or access to basic services.

Credit Cards Are a Common Backup

When savings are unavailable or left untouched, credit cards are often the next option. The Federal Reserve found that 15% of adults would charge a $400 emergency to a credit card and pay it off over time.

That can offer short-term breathing room, but balances usually come with interest. For instance, a $400 charge at a hypothetical 24% annual percentage rate could add about $8 in interest in the first month if the balance stayed unpaid. That is one reason emergency savings matter: even a small cushion can reduce the need for costly borrowing.

Borrowing From Family or Friends

Not every household turns to a lender. The Fed found that 10% of adults would borrow from friends or family to handle a $400 emergency. Another 7% said they would sell something they own, while smaller shares would use bank loans, lines of credit, payday loans, or overdrafts.

These answers show that financial shocks often spread beyond the person who receives the bill. Family members and friends can become part of the solution. While borrowing from someone close may avoid interest charges, repayment expectations can be unclear and may add stress to personal relationships.

Many Households Still Lack a Three-Month Cushion

The report was not entirely bleak, especially when it came to larger setbacks. The Federal Reserve found that 55% of adults had enough emergency savings to cover three months of expenses, unchanged from the prior year.

Another 15% said they could manage three months of expenses using other resources, such as borrowing, selling assets, or tapping additional savings. Still, 30% said they could not cover three months of expenses through any of those methods. That suggests many households have a buffer, but a sizable share remain exposed to unemployment, illness, or other major disruptions.

Inflation Continues to Squeeze Budgets

Saving is harder when daily costs take up most of a household’s income. In the Fed’s report, 91% of adults said price increases were either a major or minor concern. Another 58% said rising prices over the previous year had worsened their financial situation.

As groceries, housing, insurance, and utilities become more expensive, less money is left over after bills. That helps explain why even households that look stable on the surface may struggle to build a meaningful emergency fund.

Unexpected Costs Are Common

A $400 emergency may sound like a theoretical example, but surprise expenses are common for U.S. households. The Federal Reserve found that 59% of adults had at least one major unexpected expense in the previous 12 months.

Vehicle repairs or replacements were the most common, affecting 30% of adults. Major home or appliance repairs followed at 22%, and unexpected medical costs affected 21%. Those numbers show why emergency savings are not just for unlikely disasters. A broken transmission, a failed heating system, or a surprise medical bill can quickly create pressure, even for people who carefully watch their spending.

How to Start an Emergency Fund on a Tight Budget

Financial experts often suggest saving several months of essential expenses, but that goal can feel impossible when money is already stretched. A more manageable approach is to start small, such as with $100, then gradually work toward $400 or $500.

Setting aside $10 a week would build a $400 cushion in 40 weeks, assuming the money is not needed for another emergency first. The Consumer Financial Protection Bureau provides resources on saving, budgeting, and preparing for financial shocks. Keeping emergency money in a separate, easy-to-access savings account can also make it less tempting to spend on everyday purchases.

Small Moves Can Add Up

Building emergency savings does not always require a major lifestyle overhaul, although low income can make saving difficult. Reviewing subscriptions, insurance costs, bank fees, and other recurring expenses may uncover room to redirect small amounts into savings.

For example, canceling two unused subscriptions that cost $12 each per month would free up $288 over a year. Another option is to set aside part of a tax refund, work bonus, or unexpected cash gift before spending the rest. These steps will not solve every financial problem, but they can help create a cushion for the next surprise bill.

A Small Bill Reveals a Larger Problem

The Federal Reserve’s findings show that emergency savings remain a major issue in the United States, even though most adults say they are getting by. While 63% would handle a $400 emergency with cash or cash-like funds, millions would depend on borrowing, selling possessions, or other alternatives.

The fact that 12% could not cover the cost by any method underscores the vulnerability facing some households. For anyone struggling to save, even a modest emergency fund can be a practical first step toward greater financial stability. The goal is not only to get through a $400 shock, but to keep one unexpected bill from throwing the rest of your finances off course.