INSIGHTi
The $400 Question: Financial Insecurity and
the COVID-19 Pandemic
February 12, 2021
The economic disruption caused by the Coronavirus Disease 2019 (COVID-19) pandemic heightened
awareness of household financial insecurity. Financial insecurity was not new for some households―they
were financial y insecure at the onset of the pandemic. Adults with children were disproportionately
financial y insecure. For some households, financial security improved between fal 2019 and summer
2020, following extraordinary economic relief provided in response to the disruptions caused by the
COVID-19 pandemic.
This Insight uses survey data on responses to “the $400 question” to analyze the above trends. The
question asks those surveyed how they would finance an unexpected $400 expense.
The Survey of Household Economics and Decisionmaking
The Federal Reserve Board conducts an annual household survey, the Survey of Household Economics
and Decisionmaking (SHED), which gauges the state of American households’ finances and risks to their
economic wel -being. The first survey, conducted in 2013 in the shadow of the Great Recession, found
that half of al adults said they could finance an unexpected $400 expenditure based on financial resources
on hand during the current month: from available cash, from checking or savings accounts, or by placing
the expense on a credit card and paying it off that same month. The other half of adults said they would
finance the expense through other means, such as borrowing, sel ing an asset, or not immediately paying
for the expense.
Trends in Financing an Unexpected $400 Expense
During the economic expansion that ended in early 2020, the percentage of adults who responded that
they would cover an unexpected $400 expense based on financial resources on hand increased. In fal
2019, that percentage stood at 63%. The year 2019 was the last full year of the longest economic
expansion on record, with employment rates for prime-age workers near their historical peak and
estimated poverty rates at their lowest point observed since 1959 (the first year the measure was
available). In fal 2019, 36% of adults said they would finance an unexpected $400 expense by
borrowing, sel ing an asset, or not immediately paying for the expense.
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The Federal Reserve Board fielded special supplements to the survey in April and July 2020 to help
assess the impact of economic fal out from the COVID-19 pandemic on household finances. In July
2020, the share of adults reporting that they would finance an unexpected $400 expense from resources
on hand had increased to 70% (Figure 1).
Figure 1. Percentage of Adults Who Said They Would Finance an Unexpected $400 Expense
with Financial Resources on Hand, 2013-2020
Source: Congressional Research Service (CRS) tabulations of the Survey of Household Economics and Decisionmaking,
2013 to 2019, and special supplements conducted in April 2020 and July 2020.
Notes: “Financial resources on hand” means that the respondent would pay for the unexpected expense through cash,
through checking or savings accounts, or by placing it on a credit card and paying it off that month. It also means they
would not pay for the expense by putting it on a credit card and paying for it over time; using a bank loan or line of credit;
borrowing from friend or family; using a payday loan, deposit advance, or overdraft; or sel ing something; and that they
would not be unable to pay it.
In spring 2020, the Treasury sent direct economic impact payments of $1,200 per adult and $600 per
dependent to households (amounts were reduced for higher income households) and fully enhanced
unemployment insurance benefits were in place. These injections of cash from the federal government to
households helped increase aggregate personal income for the calendar quarter of April to June 2020
compared to income in previous quarters. Whether the improvement in household finances measured by
the responses to “the $400 question” observed in July 2020 wil be ephemeral or lasting is not known at
this point. (Data from the fal 2020 survey are scheduled to be available later this year.)
Adults with Children Versus Other Adults
Adults with children under 18 were consistently less likely than other adults to say they would pay for an
unexpected $400 expense with financial resources on hand. This is despite families with children being a
main target group for many programs that aid low-income people, although most of that aid is in either a
noncash form (e.g., Medicaid, Supplemental Nutrition Assistance Program benefits) or once a year
refundable tax credits (earned income and child credits).
In 2015 (the year the survey first asked whether adults lived with their own children under age 18), a little
less than half (49%) of adults with children would pay for an unexpected $400 expense with financial
resources on hand. This rate increased to 54% in fal 2019. It further increased 11 percentage points to
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65% in July 2020. The trend for non-aged adults was similar, though slightly higher than the rate for
adults with children. Aged adults (65+) without children consistently had the highest rate of saying they
would pay for an unexpected $400 expense from financial resources on hand (Figure 2).
Figure 2. Percentage of Adults with Children and Other Adults Who Said They Would
Finance an Unexpected $400 Expense with Financial Resources on Hand, 2015-2020
Source: Congressional Research Service (CRS) tabulations of the Survey of Household Economics and Decisionmaking,
2013 to 2019, and a special supplement conducted in July 2020.
Notes: See note to Figure 1 for the definition of “financial resources on hand.”
Conclusion
The “$400 question” provides a different lens on households’ financial wel -being and security to
complement more traditional measures such as the poverty rate. It asks a relatable question—how do you
pay for this unexpected expense? The trends in responses to that question might provide context as
Congress considers additional COVID-19 pandemic-related economic relief or later legislation intended
to address household financial wel -being and security.
Author Information
Gene Falk
Specialist in Social Policy
Disclaimer
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This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan shared staff
to congressional committees and Members of Congress. It operates solely at the behest of and under the direction of
Congress. Information in a CRS Report should not be relied upon for purposes other than public understanding of
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