Life has a way of surprising people in a less-than-ideal fashion. You might head over to your parking spot to drive to work, only to find that your car suddenly won't start. Or, you might wake up craving a nice, hot shower only to realize that overnight, your water heater seems to have given up on doing its job.
It's for reasons like this that it's so important to have an emergency fund. You just never know when life might throw you a curveball. And if you don't have savings, you may have no choice but to charge a surprise expense on a credit card and pay off the balance over time, all the while accruing interest and stressing about it along the way.
A recent SecureSave survey found that 63% of Americans could not cover a $500 emergency expense by tapping their savings. So if you fall into that category, it's important to take steps to build up cash reserves -- even if it takes a while to get to a place where you have a solid cushion.
You don't want debt hanging over your head
Credit card debt -- or any type of debt, for that matter -- can be expensive and stressful. And when you carry a balance on a credit card forward, you run the risk of accruing lots of interest that only makes your debt harder to pay off.
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Case in point: Let's say you're forced to charge a $3,000 home repair on a credit card with a 20% APY. If it takes you three years to shed that balance, you'll end up spending a little more than $1,000 on interest alone. Ouch.
That's why it's so important to have some emergency savings on hand. A $3,000 savings account balance may not be doable for you in the near term. But it's important to save something so smaller expenses don't immediately drive you into debt.
The easiest way to build cash reserves
Saving money is not an easy thing to do. If it were easier to save, perhaps more Americans would be in a position to cover a $500 unplanned expense with relative ease. But a good way to go from minimal or zero savings to a more robust balance is to put the process on autopilot.
Suze Orman, who co-founded SecureSave, insists that "the best way to save is to automate it." Orman says that for people who don't have an emergency savings account through an employer (which is the case for many workers today), a good bet is to set up an automatic transfer from checking to savings every month.
And it doesn't have to be a massive sum, either. If you can only swing $10 a month now, do that. And if, come January, you get a raise and can then afford $30 a month, ramp up.
"You have to start somewhere," says Orman. So don't be discouraged if you're building up your cash reserves slowly. If you start automating your savings now, you might have $100 in the bank by the end of the year. That's something to be proud of if you're starting with $0.
All told, it's important to put yourself in a position where you can cover the occasional unplanned bill. Automating the process could lead to a much-improved financial picture for you -- and a lot less stress to boot.
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FAQs
Many or all of the products here are from our partners that compensate us. It's how we make money.
What percentage of Americans have less than $500? ›
A recent GOBankingRates study of 1,063 U.S. adults found that nearly half of those surveyed have less than $500 in savings, with 36% having $100 or less in savings. While inflation has steadily improved since the June 2022 peak of 9.1%, borrowing rates and consumer prices are still much too high and real wages too low.
What percentage of Americans can t cover a $1,000 emergency without going into debt? ›
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.
Does the average American have an emergency fund? ›
59% of Americans are uncomfortable with their level of emergency savings, as of May 2024 polling, including 32% who are very uncomfortable and 27% who are somewhat uncomfortable. But many have no savings at all. 27% of U.S. adults have no emergency savings, as of May 2024 polling — the highest percentage since 2020.
What percent of Americans have $1000 in savings? ›
Key Takeaways. More than one in four Americans (28%) have savings below $1,000. This is the case for 32% of Gen Zers, followed by Millennials at 31%, Gen X at 27% and Baby Boomers at 20%.
How many people have 3 months savings? ›
Clarify Capital also found that 54% of Americans have three months' worth of emergency savings or less, while 18% have no emergency fund at all. But here's the amount of money you should aim to save so you can get through a layoff.
How many Americans have $2000 in savings? ›
Majority of Americans Have Less Than $1K in Their Savings Now
| How Much Do Americans Have in Their Savings Accounts? | | |
|---|
| $101-$500 | 12.80% | 10.04% |
| $501-$1,000 | 11.30% | 12.58% |
| $1,001-$2,000 | 10.60% | 9.81% |
| $2,001-$5,000 | 10.60% | 10.64% |
4 more rowsMar 27, 2023
The findings of a new survey from Bankrate.com include that 27% of respondents have no emergency savings and 59% of those who do are not comfortable with what they have accrued including almost one third who are very uncomfortable.
What percentage of Americans live paycheck to paycheck? ›
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. In other words, more than three-quarters of Americans struggle to save or invest after paying for their monthly expenses.
Do 90% of millionaires make over 100k a year? ›
Ninety-three percent of millionaires said they got their wealth because they worked hard, not because they had big salaries. Only 31% averaged $100,000 a year over the course of their career, and one-third never made six figures in any single working year of their career.
Around 23% of Americans are debt free, according to the most recent data available from the Federal Reserve. That figure factors in every type of debt, from credit card balances and student loans to mortgages, car loans and more. The exact definition of debt free can vary, though, depending on whom you ask.
Is a millionaire's best friend? ›
A Millionaire's Best Friend: Compound Growth
Here's a little secret: Compound growth, also called compound interest, is a millionaire's best friend. It's the money your money makes.
How many Americans have $500 in savings? ›
Nearly Half of Americans Don't Have $500 in Savings
According to the survey, 49% of Americans have $500 or less in their savings account, with 36% reporting they have less than $100 saved up. This means that a small financial upset can cause these households to end up in debt — or more debt.
How many people have $1,000,000 in savings? ›
In fact, statistically, just 10% of Americans have saved $1 million or more for retirement. Don't feel like a failure if your nest egg isn't quite up to the seven-figure level. Regardless of your financial position, however, you should strive to save and invest as much as you can.
How can I get a $1000 emergency fund? ›
Every pay period, ask your employer to deduct $100 from your paycheck and transfer it to a savings account. Ask your HR representative for more details and to set this up. 2. Ask your bank or credit union to transfer $100 from your checking account to a savings account every month.
Is $500 a good emergency fund? ›
How Much You Should Have in Your Emergency Savings. Here's a Dave Ramsey principle we agree with: If you make less than $20,000 per year, aim to have at least $500 in emergency savings. If you make more than $20,000, then aim for at least $1,000.
Is 500 dollars a lot of money in the US? ›
“Is $500 a lot of money in the US?” The median household income in America is around $60,000 per year, and the poverty line for a single adult is $12,880 per year. So $500 would keep the median household going for about 3 days, or a “poor” person going for about 2 weeks.
How many people have $10,000 in savings? ›
Majority of Americans Have Less Than $1K in Their Savings Now
| How Much Do Americans Have in Their Savings Accounts? | | |
|---|
| $1,001-$2,000 | 10.60% | 9.81% |
| $2,001-$5,000 | 10.60% | 10.64% |
| $5,001-$10,000 | 9.20% | 9.51% |
| $10,000+ | 12.60% | 13.48% |
4 more rowsMar 27, 2023
