Most households can weather a $400 financial shock, research finds — but some have to get creative

When it comes to paying for an emergency expense, cash is still 100% the preferred method, expert says.

But many households can cover an emergency $400 expense, when combinations of cash, disposable income or short-term credit are considered, new research finds.finds a bright spot: Most households have enough liquidity to cover "moderate expense shocks," according to a recent JPMorgan Chase Institute analysis of a sample of 5.9 million households through anonymized banking data.

"We hear questions all the time like, 'Are people living paycheck to paycheck?'" said Chris Wheat, president at JPMorgan Chase Institute.Yet JPMorgan Chase Institute finds the share of individuals who are unable to cover such an expense is lower — just 8% — when considering a combination of available cash, disposable income or short-term credit.

The research finds a higher level of financial resiliency than what shows up when only considering cash reserves, and notes that access to affordable credit can help. Most families — 92% — can cover a $400 "expense shock" through a combination of cash savings, disposable income or short-term credit, JPMorgan Chase Institute finds.

That includes 67% of households that can cover the expense using all cash savings; another 20% that can cover it with a combination of cash and disposable income; 3% that can use cash, disposable income and a credit card without incurring interest; and 2% that would use cash, disposable income and a credit card that can be paid off within three months.Yet turning to credit to handle even a short-term cash crunch can contribute to long-term debt.

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