Planning for the unexpected is crucial since life doesn't always go as planned.
But only 44% of Americans are prepared for a $1,000 emergency expense, according to a survey from financial analysis site Bankrate. While a percentage point higher than last year, most people still say they would be derailed by such a crisis.
The report, published Tuesday, sampled answers from over 1,000 participants, 66% of whom who worry whether they could cover a month’s living expenses if they lost their primary source of household income.
Of the unprepared Americans, 21% said they would use a credit card for the necessary expenses, 16% would reduce their spending on other things to pay it upfront and 10% would ask a loved one to borrow money, the survey found. Just 4% said they would be forced to take out a personal loan.
"All too many Americans continue to walk on thin ice, financially speaking," Mark Hamrick, senior economic analyst at Bankrate, said in the report.
Hamrick said that high inflation often stops people from saving more.
The study found that 63% of Americans blame high inflation for the difficulty of saving money. Just 45% cited rising interests rates, 41% cited a change in income and 42% listed another option.
“Inflation has been a key culprit standing in the way of further progress on the savings front," Hamrick said. "Fortunately, rising interest rates have also provided more generous returns on savings."
The report offered three tips on how to build an emergency fund amid high inflation.
Calculate how much emergency savings you need. Experts say saving around three to six months of expenses is ideal but not a concrete rule, Bankrate said. They added that hiring slowdowns, recessions or other economic hardships may require you to save more.
Open an account specifically for emergency use. Bankrate urges people to have emergency funds accessible for when it's needed, whether it's an online savings account, money market mutual fund or a money market account.
Budget around an emergency fund. Getting by for each week and month is not ideal. It's crucial to consider how you can routinely save in case of emergencies and to stick to good habits, Bankrate said.
The survey was conducted by Bankrate, a financial analysis and comparison site. Bankrate found that only 44% of Americans surveyed could afford a $1,000 emergency expense. That number is actually up one percentage point from the previous year, the company said.
The majority of Americans (56%) cannot afford a $1,000 emergency expense, and over one-third (35%) say they would borrow the money in some form. That includes 21% who say they would finance it with a credit card and pay it off over time to cover the expense, down from 25% in 2023.
Only 44% of U.S. adults would pay an emergency expense of $1,000 or more from their savings, as of December 2023 polling. 35% would borrow money, including 21% who would finance with a credit card and pay it off over time, 10% who would borrow from family or friends and 4% who would take out a personal loan.
While nobody really wants to tap into their emergency savings, most Americans couldn't even afford to do so if they had to. A stunning new Bankrate survey of 1,030 individuals finds that more than half of American adults (56%) lack sufficient savings to shoulder an unexpected $1,000 expense.
How much money Americans have in their savings accounts—nearly half have less than $500. Nearly half of Americans have $500 or less in their savings accounts, an amount that leaves them vulnerable to unexpected expenses, according to a GOBankingRates survey of 1,063 U.S. adults conducted in November 2023.
The 50-30-20 rule recommends putting 50% of your money toward needs, 30% toward wants, and 20% toward savings. The savings category also includes money you will need to realize your future goals.
They don't need to sell stocks, which would trigger capital gains taxes. Instead, they can take loans against their shares. Securities based lending, securities based lines of credit, home equity lines of credit and structured lending are options for leveraging assets without selling them.
Bank or credit union account — If you have an account with a bank or credit union—generally considered one of the safest places to put your money—it might make sense to have a dedicated account where you can keep and maintain these funds.
How much do people save for retirement? In 2022, about 46% of households reported any savings in retirement accounts. Twenty-six percent had saved more than $100,000, and 9% had more than $500,000. These percentages were only somewhat higher for older people.
It could be poor decision-making with credit, credit card abuse being one of the most challenging. It could be due to a lost job or a poor economy,” said Dr. Jacob Tenney, assistant professor and director of financial planning for the University of Charleston's School of Business.
14% of Americans Have $100,000 Saved for Retirement
Most Americans are not saving enough for retirement. According to the survey, only 14% of Americans have $100,000 or more saved in their retirement accounts. In fact, about 78% of Americans have $50,000 or less saved for retirement.
How Many Americans Are Living Paycheck to Paycheck? A 2023 survey conducted by Payroll.org highlighted that 78% of Americans live paycheck to paycheck, a 6% increase from the previous year.
Fewer than half of Americans, 44%, say they can afford to pay a $1,000 emergency expense from their savings, according to Bankrate's survey of more than 1,000 respondents conducted in December. That is up from 43% in 2023, yet level when compared to 2022.
That way, you still have enough in your bank account for any bills or daily expenses that might come up. “You should keep an amount of cash at home that you are comfortable with in case of emergency.
How Much Should I Save for My Emergency Fund? Let's talk about how much to save for an emergency fund. That answer depends on a few things. Starter emergency fund: If you have consumer debt, you need a starter emergency fund of $1,000.
How much should you save? While the size of your emergency fund will vary depending on your lifestyle, monthly costs, income, and dependents, the rule of thumb is to put away at least three to six months' worth of expenses.
According to the 2024 Financial Literacy Survey by GOBankingRates, 13% of Americans do not currently bring in enough money to cover their bills, and 46% barely bring in enough to cover their bills.
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