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LIANE HANSEN, host:

For nearly two years, the U.S. economy has been battered by a recession brought on by excessive borrowing. Millions of people took on far too much mortgage debt or maxed out their credit cards. We were supposed to learn a lesson from this crisis. We were going to embrace the new frugality. But a study released recently shows most Americans still dont have even modest savings.

Joining us to discuss life without a financial safety net is NPR's senior business editor Marilyn Geewax. Welcome back, Marilyn.

MARILYN GEEWAX: Hi, Liane.

HANSEN: Elaborate on the results of this study.

GEEWAX: A couple of professors one is from Harvard and the other one was Dartmouth conducted this survey to see how many households could round up $2,000 within 30 days, in case they had an emergency. Say, your car breaks down or you have a major house repair that involves plumbing or whatever. And they found that people said they about half of all Americans said they couldnt scrounge up $2,000, even if they turn to their relatives for help. So if you face an emergency like that, you pretty much have to either start selling some things or going to credit cards.

HANSEN: Whats wrong with the credit card?

GEEWAX: A few years ago, it was very easy to get credit. In fact, as we now realize, it was probably way too easy. But these days, borrowing money is pretty tough. Real estate values are down a lot, so a home equity loan is not an option for a lot of people. And even if you do have a credit card, the fees, the interest rates, they're so high these days 20, 30 percent, even more.

So you dont want to let a small emergency, like a car breakdown, turn into some huge financial catastrophe because you're being pulled down by these interest payments and fees. It just makes a lot more sense to have some savings so that you can handle small emergencies.

HANSEN: But I thought that in this recession that people were saving more.

GEEWAX: Well, it's certainly true that before the recession began, the personal savings rate was effectively zero. And now that people have seen so many others losing their jobs, the savings rate is back up a little bit to three, four percent, but it's still really low by historic standards.

And the researchers say that most of us continue to live with what they call financial fragility. That is you may appear to have a middle-class lifestyle, but really you're pretty much one pink slip or one car breakdown away from falling into real financial trouble.

HANSEN: Why do some many people live on the financial edge?

GEEWAX: You know, it's funny, the people who lived through the Depression, they grew up in all those hard times but yet they're the ones who tended to save and really take the message that you need a rainy day fund. But the baby boomers grew up in a time when jobs were relatively plentiful, credit was pretty easy. And, you know, of course, the grandchildren of the Depression people, they grew up at a time when lenders thought it was a great idea to get college students to take out credit cards.

So we've just sort of step-by-step, generation-by-generation, gotten more accustomed to this idea of easy credit. And I called one of the professors, Anna Lusardi at Dartmouth, and I asked her about it. And she said this has led to a kind of financial illiteracy. We dont read the fine print, we dont really think about compounding interest. And so, people have kind of lost track the financial risks.

HANSEN: So help us out. How do you build up a $2,000 rainy day fund?

GEEWAX: You know, its pretty much the same thing as going on a diet. You just have to be slow and steady and persistent. And, you know, if you have a household where there's two wage earners, if each of those two people just put let's say they put $20 in a cookie jar every time they listen to Liane Hansen on Sunday mornings, by the end of one year that couple would have $2,000.

So, you know, can do it, but youve got to find that $20. Now, it sounds like a lot of money, but think about it: If you pack your lunch, you carpool, there's all kinds of ways to trim a bit. And it may be annoying at the time, but it's a lot less annoying than getting on a debt treadmill that leads you into deep debt.

HANSEN: NPR's senior business editor Marilyn Geewax. Thanks a lot, Marilyn.

GEEWAX: Oh, you're welcome.

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