Too Many Middle Class are Working Poor


The American Dream.

If you asked most Americans, I think they would say that they aren’t poor. I think they would say that they are part of the middle class. Many were surprised to find out how much money one has to earn to actually be considered middle class. Take a look at this chart and see where you land. If you want to be more specific, use this calculator from the Pew Research Center to find out how you compare to other families.

Since so many want to believe that they aren’t poor, they are just broke (hello, Dick Gregory) many also have trouble admitting that money struggles are an issue. According to The Atlantic, every year the Federal Reserve Board does a survey about personal finance. This year, this data point stood out:

The Fed asked respondents how they would pay for a $400 emergency. The answer: 47 percent of respondents said that either they would cover the expense by borrowing or selling something, or they would not be able to come up with the $400 at all.


It might surprise some, but it doesn’t surprise me. For years I have been suggesting that having $500 in an emergency account (read Money Matters: The Get It Done in 1 Minute Workbook or 10 Things College Students Need to Know About Money) could be the difference between someone making it and someone going under. Many of the people that think they are middle class could actually be considered the working poor (I wrote about the concept of the working poor here, here and here).


If you are not sure what you would do if you needed to come up with $400 here are some ideas to help you build your emergency fund:

Idea #1 Open a money market account with the goal of having $500 in it within six months. If you deposit $21 per week you’ll reach your goal in no time.

Idea #2 Put $50 per check in an envelope and add another $50 each paycheck. You’ll have $500 saved up in 5 checks (that’s 2.5 months). The challenge with this method is that if your home is broken into or catches on your fire, your money goes with it.

Idea #3 Open a secured credit card. When this happens, sometimes people turn to a payday loan. Instead of that open a secured card with a $500 limit. Once you have your $500, if you don’t trust yourself, send that $500 to a credit card company that will hold it for you and do two things 1) provide you with a credit card with a $500 limit to use in emergencies and 2) hold that $500 cash deposit so you don’t spend it and return it when you close your account.

Obviously, I think the best option is idea #1 but I understand if there are circumstances that make this difficult. Whichever option you choose, start creating a financial cushion now.

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