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Here's where people are turning for cash as household income takes a dive

People wait in a food bank line in Brooklyn, New York, April 24.
Angela Weiss | AFP | Getty Images

The economic impact of coronavirus has put a dent in Americans' finances: Nearly 1 in 3 individuals has experienced a decline in income since the pandemic arrived.

Those are the results from a new survey from Bankrate.com. The personal finance website polled 2,653 adults online from April 29 through May 1.

Lockdowns and social distancing orders have forced businesses to close their doors and lay off or furlough workers.

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Close to 3.2 million people filed an initial unemployment claim last week, bringing the total number of jobless workers to 33.5 million over the last seven weeks, the U.S. Department of Labor.

"This experience is much worse, much more sudden than the 2008 recession," said Greg McBride, chief financial analyst at Bankrate.com.

"We've gone from the lowest unemployment in 50 years to the highest unemployment in 90 years," he said. "The lion's share of it happened in seven weeks."

Households lucky enough to have built an emergency fund are turning to those pots of cash as the economy worsens.

Of those who lost income, 36% have drawn down from their emergency savings to get by, said McBride.

These individuals — who may have been laid off or furloughed — are three times as likely to tap their savings, he said.

"These things can happen without warning, and that's why that emergency savings is so vital," McBride said.

Rising pressure, climbing debt

The standard rule of thumb is for individuals to have enough savings to cover at least three to six months' worth of expenses.

However, the next concern on the horizon is whether workers' savings will be enough to get them through a lengthy period of reduced income.

Consider that the extra $600 in unemployment income that laid-off workers are currently receiving will end on July 31.

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When emergency funds and other income sources fall short, Americans might rely on credit cards to cover essentials.

Indeed, 16% of the people polled by Bankrate.com said they've taken on more debt since the coronavirus pandemic kicked off.

"The longer the income disruption persists — the longer the period of unemployment — the more that households will drain their savings and potentially add to their debt," said McBride.

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