Emergency Savings Amid Economic Uncertainty
Stagnant Emergency Savings
As inflation and economic uncertainty continue to affect Americans, only 48%t of U.S. adults say they have enough emergency savings to cover at least three months’ worth of expenses, according to a new Bankrate survey. This percentage has remained stagnant since 2022 when inflation was at a 40-year high.
Common personal finance advice recommends having at least three months of expenses saved for emergencies like a job loss or an unexpected medical bill. As a significant portion of Americans don’t have an emergency fund for three months of expenses, 57% of U.S. adults are uncomfortable with the emergency savings they currently have.
Generation Gap in Emergency Savings
Younger Americans, who are less likely to have built the habit of saving, are more likely to have little to no emergency savings. Nearly one-third (31%) of Gen Zers (ages 18-26) do not have emergency savings, while baby boomers (ages 59-77) are more than three times as likely to have enough savings to cover six months or more of expenses.
Savings Habits and Income Levels
Higher-income households are more likely to feel comfortable with their level of emergency savings. About two-thirds (67%) of households with an income under $75,000 a year are uncomfortable with their current level of emergency savings, compared to 41% of those who earn $75,000 or more a year.
Credit Card Debt vs. Emergency Savings
Over one-third (36%) of people have more credit card debt than emergency savings, the highest percentage in 12 years of Bankrate’s survey. The majority (51%) of U.S. adults still say the amount in their emergency fund or savings account is higher than their credit card debt.
Impact of Economic Factors on Savings
Inflation led to rising prices over the last year for everyday goods like groceries and gas, leading to fewer people being able to save for emergencies — 74% of people said economic factors such as inflation/rising prices, rising interest rates, or changes in income or employment caused them to save less.
Just under half of U.S. adults (48%) said they were saving less due to rising interest rates. High-yield savings accounts are offering the highest returns since 2008.
44% of people are saving less due to a change in income or employment. 20% said that a change in their income or employment status is causing them to save more.
68% of people say they would be worried they wouldn’t be able to cover their living expenses for a month if they lost a primary source of income tomorrow.
The state of emergency savings in the U.S. remains stagnant, with many Americans lacking sufficient funds for unexpected expenses. Economic uncertainties, income disparities, and credit card debt continue to be significant concerns. As inflation and rising interest rates affect savings habits, building and maintaining an emergency fund is essential for financial security and should be a top priority for all.
Source:
https://www.bankrate.com/banking/savings/emergency-savings-report/#tips
https://finance.yahoo.com/news/57-americans-t-afford-1-195843284.html
https://fortune.com/recommends/banking/57-percent-of-americans-cant-afford-a-1000-emergency-expense/
https://www.cnbc.com/2022/01/19/56percent-of-americans-cant-cover-a-1000-emergency-expense-with-savings.html