Based on multiple surveys conducted in 2023, anywhere between 40% and 78% of Americans say they are living paycheck to paycheck, meaning that their income barely covers essential expenses.1 Accumulating savings is difficult under these circumstances. Any loss of income or an unexpected expense can lead to financial hardship, making it challenging to meet basic needs and obligations. And the costs of repeated and extended experiences of hardship are more than financial. Research shows that financial hardship negatively affects the health and well-being of both adults and children.2
According to the 2022 Survey of Consumer Finances, the average liquid savings (in bank and transaction accounts) across all households was roughly $62,000, though this number is inflated by very large savings among a small share of the population. The median—the middle of the distribution of savings—was just $8,000. Low-income households had even less of a cushion: households with incomes below the 20th percentile had an average of $7,860 saved, and the median was only $900.3
Given the challenge many people face in trying to build savings and plan ahead to better cope when financial difficulties arise, we were particularly interested in understanding the extent to which unconditional cash transfers affect recipients’ savings and financial resilience.
Savings increased
At the time of enrollment, study participants and their households had very little savings. The average balance in all bank accounts was roughly $2,700 and the median was about $450. By the second year of the program, the unconditional cash transfers resulted in a significant increase in recipients’ savings by $930 on average—a 16% increase relative to the average among control participants.4 At the end of the final year the effect declined to about $800, but the increase was still equivalent to 12% of the control participant average.5
Across all time periods, recipients were, on average, 4% more likely to have at least $100 in savings compared to the 71% average among control participants.6 We also measured participants' household savings as a share of income, which is a way to measure how much money people save from what they earn. Household savings as a share of income (excluding the transfers) increased by 40% relative to the control participant average.7
Savings varied over time
The data visualizations below plot the savings trajectory of each participant throughout the transfer period—first for control participants and then recipients. The column on the far left shows savings at the time of enrollment, the middle column depicts savings at year two and the far right column shows savings at year three. Because there are twice as many control participants as recipients, that plot is more dense. As you can see there was wide variation in savings over time.8 Some recipients and control participants increased their savings steadily over the duration of the transfers, while others reported large increases or decreases at each time period.
At the end of the program we asked all study participants to report the largest amount of savings they had in the bank at any point during the program, and this is where we observed the largest effect. The unconditional cash led to a $2,369 increase in recipients’ maximum savings—a 35% increase relative to control participants’ average max savings of $6,769.7 The fact that the increase in maximum savings is so much larger than any of the point-in-time estimates during years two and three reflects the volatility of savings balances. Savings balances can change a lot as households save up and spend down their savings over time.
One recipient, Kendra, captured this volatility when she described her experience with saving during the study as a “roller coaster ride throughout the three years.” She explained, “Different times I've looked in my account, I'm like, oh, I'm doing great. And then it's like something would happen where I have to spend it...trying to address housing needs, transportation needs, and, you know, just, getting bills caught up.” She said, “I think at one point, I was up to $10,000 in COVID. Then I wound up having to spend most of that…towards the end of 2021 or beginning of 2022, most of that was gone.”
Kendra told us the biggest expense she funded with savings was a family court case to fight for child support from her son’s father. The attorney she hired to help her charged $750 a month, and the process ended up dragging on for almost a year and cost her nearly $7,000. “Had it not been for [the cash transfers], I don't think I'd been able to do...I'm talking about this family court case…I was able to address a very big need. So I wasn't able to save as much as I wanted to.” When we spoke with her at the end of 2023 just before the transfers ended, the court case had recently been resolved in her favor.
Kendra’s story is emblematic of one of the challenges of evaluating the impact of unconditional cash transfers. The definition of a “good” outcome is not always clear, and this is particularly true for savings. Accumulating savings is good, but spending down savings to make investments or progress toward one's goals—purchasing a vehicle or home, paying for education or health care—can also be good and may provide longer term benefits. And while it would be better if financial shocks like job loss, health emergencies, and unexpected expenses did not occur, being able to draw on savings to cover the expenses and weather the shocks is better than the alternatives of taking on additional debt, losing assets, or filing for bankruptcy. Kendra told us she did not view having to spend down her savings as a negative, or "a missed opportunity," because she was able to use her savings to accomplish one of her greatest goals.
These contradictions highlight the need for in-depth analyses that look at savings over time. While we have more work to do to better understand the variation, preliminary reviews of qualitative interviews and survey data suggest several potential patterns.
Saving for a purpose
Some recipients reported saving for a specific goal, like moving, buying a vehicle, or going back to school. Once they had saved enough to achieve their goal, they spent down their savings.
Charlotte, for example, is a recipient who was living paycheck to paycheck at the beginning of the program. She told us, “I make good money, but you know, I take care of a lot of people. I take care of my kids, my grandkids…” At the end of the month, Charlotte had nothing left over for savings, emergencies, or additional expenses. All of this changed when Charlotte began receiving the monthly unconditional cash transfer payments. She started saving with the hope of buying a house, and by the second year of the program she had saved enough money for a downpayment on a home that she loved.
Though we did not see an impact on homeownership overall, we do find a significant increase in moving neighborhoods and housing units, and the effect was largest during the second year after people had time to save up.
Purchasing a new or more reliable vehicle was another commonly-cited goal among qualitative participants. Some recipients saved the transfers to buy cars outright, while others worked to improve their credit scores and took out car loans. Angel, a recipient who used the unconditional cash to improve her credit and purchase a car, is a good example. At the beginning of the program, Angel was balancing two part-time jobs and wanted to buy a car to help expand her employment possibilities. “I'm kind of limited to how far the public transportation can take me. If I could find my own mode of transportation, that opens up another area where I could get a full-time job.” But Angel was struggling financially and putting a lot of bills on credit cards, so her credit score was too low to qualify for a loan. After receiving the unconditional cash transfers she was eventually able to pay off her credit cards, raise her credit score to the “high 700s,” and save for a down payment. “That's why I was able to get a car with a reasonable monthly payment,” Angel said.
Overall, recipients were, on average, 3% more likely to own or lease a vehicle compared to the average control participant, and auto loan balances increased by about $805.9
Coping with financial shocks and unexpected expenses
In addition to saving for a big purchase, some recipients accumulated savings during the course of the study that they leveraged to weather financial shocks. Qualitative participants frequently cited unexpected expenses as the primary reason they struggled to achieve financial stability—often a result of transportation emergencies, health concerns, or the loss of employment.
During the second year of the program, one recipient, Maureen, was diagnosed with an autoimmune disease. She became critically ill and had to be hospitalized for two weeks in the intensive care unit. At the time she was working full time and helping to support her family financially. While her private health insurance covered most of her hospital stay, she still had to pay $25,000 in medical bills after insurance. All of the money she had been diligently saving for the purchase of her first home went toward paying her medical bills, and she also took money out of her life insurance policy to pay down her debt. During the last in-depth interview, when Maureen was on the road to full recovery, she disclosed that, due to her medical condition, she had close to nothing left in her savings account.
Maureen's experience was not unique. Between 30% and 40% of all participants reported at least one large unexpected expense each year, and recipients were 4 percentage points more likely than control participants to report an unexpected expense in a given year.10 The higher rate among recipients makes sense when you look at the most common unexpected expenses in the graphs below. The largest differences are in car and home repairs and maintenance, and many recipients used the transfers to buy cars or move. Emergency medical care and non-emergency health care costs were also more frequent for recipients, aligning with our findings that the transfers increased some types of health care utilization.
Though the cash transfers did not insulate recipients from financial shocks or unexpected expenses, the cash provided more flexibility for recipients to pull from their savings to cover unexpected expenses like those Maureen faced.
Recipients were, on average, 24% more likely to report paying for an unexpected or emergency expense out of savings compared to the average control participant.7
Recipients were also 31% more likely to pay for an unexpected expense by reducing spending in other areas, suggesting that they had more flexibility to absorb these expenses.7
Though the effect varied by time period, recipients were anywhere from 4% to 15% more likely than the average control participant to say they could comfortably pay a $400 emergency expense out of savings.
Another recipient, Mimi, a mother of four, used most of her cash transfer payments to try to build up her savings. Because her husband had irregular seasonal employment, she took money from her savings to cover her family’s living expenses whenever he was out of work. In Mimi’s case, the cash transfers helped her family cope with income volatility, pay bills, and buy groceries during times of financial drought. They also kept her from going further into debt.
Neither Maureen nor Mimi was able to consistently accumulate large amounts of savings, but the unconditional cash transfers increased their financial resilience and allowed them to weather significant financial challenges. This is a common theme in both the qualitative data and the survey data. We find modest increases in savings at any one point in time, but evidence suggests that recipients saved and then frequently drew on those savings to cope with financial hardship or accomplish other goals.
Key takeaways
Cash provides people more financial freedom to respond to changes in their needs and circumstances. While some unconditional cash transfer recipients were able to save a substantial portion of the transfer throughout the program and build a significant financial cushion going into the future, the experience of the average recipient is more complex. Many recipients spent a large portion of the transfer meeting basic needs, some saved up for larger expenses like moving or buying a car, and others saved but then drew on those savings when they encountered financial shocks or unexpected expenses.
Though monthly transfers did not lead to significant increases in wealth for the average recipient during the study, our findings suggest that monthly unconditional cash transfers can help low-income households smooth consumption and improve financial resilience.