We’re all in harm’s way of an economic downturn

The U.S. personal savings rate as of July stood at 3.5 percent. That’s the lowest since April 2008, when Americans were trapped in the jaws of a mean recession. And consider this: The economy is now in its ninth year of economic growth, and wages have been inching higher.

Smart people living in harm’s way of hurricanes know to fortify their homes before the storm hits. In a similar vein, the prudent will shore up their financial position before the next recession bears down — and one surely will. We’re all in harm’s way of an economic downturn.

How prepared are Americans to weather a financial crisis? The answer is that most are not, to a shocking extent.

Some 46 percent of Americans say they could not scratch up $400 in ready cash to meet an emergency. That percentage would be hard to believe had it not come from the Federal Reserve.

The U.S. personal savings rate as of July stood at 3.5 percent. That’s the lowest since April 2008, when Americans were trapped in the jaws of a mean recession. And consider this: The economy is now in its ninth year of economic growth, and wages have been inching higher.

Excused from this conversation are the relatively well-off — that is, those whose money cushion is such that they could survive a financial reversal for at least a year. This group includes not only the decidedly rich but those working families who’ve saved carefully and spent with discipline. Also excused are struggling workers trying to get by on stagnant low wages. (Some in this group, however, should revise their borrowing habits.)

Despite the dismal record, many conservatives push the fantasy of an investor nation in which ordinary people save for their future needs. They see it as an alternative to government — namely, the Social Security program in its current form.

But most Americans just aren’t cut out to be sophisticated investors. They unwittingly do the wrong things.

A friend of mine, a highly intelligent and frugal woman, had amassed a decent stock portfolio. But when stock prices plunged in 2008, she panicked and sold everything. Thus, she totally missed out on the stock market rebound that would have restored her wealth and then some.

She had lots of company. Since the Great Recession, the middle class has been the most reluctant group to invest in stocks, according to Gallup. Today only about half of Americans own stock at all, the lowest rate in 19 years.

Furthermore, 80…

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