So often the conversation is focused on the city government and their budget. But the budgets of municipalities and counties is often reflective of the budgets of the citizens. One doesn’t need to look far to know that thousands upon thousands of Detroiters have lost their homes in foreclosures, as well as many water shutoffs among other issues.

But a new report out shows that a small nest egg of as little as $250 can be the biggest of differences between paying that bill and not; or having to take out an expensive payday loan or just needing to be frugal to get by that tight month – or having to turn to the government for help.

The report draws the line between the financial health of cities and that of their citizens.

From the Urban Institute:

A few hundred dollars in savings “could help you pay a utility bill. That could keep you from taking out an auto title loan or a payday loan, which can lead you potentially into a spiral of debt,” said Signe-Mary McKernan, senior fellow at the Urban Institute. “That doesn’t mean that more savings isn’t better…because we are finding that higher savings are associated with even lower hardship levels. So having more than $750 is going to get you even further. But don’t let that wanting-to-get-further keep you from getting started.”

Jarring facts include that almost a quarter (24 percent) of Americans don’t have any cash savings at all, and nearly two-thirds (62 percent) of families have less than $5,000 in non-retirement savings accounts.

This matters as one in four households have an income disruption (layoff, health issue, etc) in any given year. As you can see in the chart below, $250-$759 in savings can make a big difference in the percentage of people who miss bills or receiving benefits.

Data via the Urban Institute
Data via the Urban Institute

In Detroit, the problem is made worse by lack of access to banking. Another report lists Detroit as the second most un-banked city in America (that means no bank account access for the household). 20 percent, or 1 in 5, of city households do not have a bank account, making it even harder to save.

There are various benefits to cities as a whole if their residents save more, according to the Urban Institute:

  • When residents have a cushion that allows them to bounce back from an income disruption, they don’t need to rely on their cities for aid. This saves money for local budgets and stops the cycle of benefit receipt before it starts.
  • When residents can pay their utility bills, cities aren’t put in the tough position of shutting off service, avoiding impacts to residents’ well-being and costly measures to access pipes and wires.
  • When residents have emergency savings, they are better equipped to leave dangerous or unhealthy living situations, conserving city resources that can be spent on others in need.
  • When residents are financially secure, they are better positioned to buy homes, support city businesses, and contribute to the local economy, helping their communities thrive.

There are creative solutions being tried in other cities. For instance, in New York and some other areas, there’s a program if you meet income requirements that takes part of your tax refund and will match it 50% if you don’t touch it for a year.

John Hope Bryant, Founder of Operation HOPE at the Detroit Policy Conference earlier this year said that “You can’t practice freedom without financial freedom.” And with this data, that statement rings truer than ever.

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