More than half of Americans don’t have an emergency fund, and 40% of those who do have less than $10,000

More than half of Americans don’t have an emergency fund, and 40% of those who do have less than $10,000.

A striking new survey conducted by Bankrate, involving 1,030 participants, reveals that over half of American adults (56%) lack sufficient savings to cover an unexpected $1,000 expense. Among these individuals, 21% indicated they would resort to debt, relying on credit cards, while 16% would significantly cut back on other expenditures to bridge the financial gap. An additional 10% would seek assistance from family and friends, 4% would opt for a personal loan, and 5% mentioned they would explore alternative measures.

Mark Hamrick, senior economic analyst at Bankrate, expressed disappointment in the findings, noting that the survey indicates a substantial number of Americans are living paycheck to paycheck. This aligns with prior Bankrate research, revealing that individuals’ two primary financial regrets are neglecting to save for emergencies and retirement.

For those lacking sufficient savings, 35% stated they would borrow money, whether from friends and family, through a personal loan, or by using a credit card. The survey also highlighted a noticeable generational disparity, with around three out of five baby boomers expressing a willingness to cover an emergency expense from their savings, while fewer than one-third of Gen Zers shared the same sentiment.

Hamrick commented on the results, stating that the capability to draw from savings might be more prevalent among those more established in their personal and financial lives. He suggested that seniors may possess the experience to recognize the priority of savings.

The primary reason cited for the lack of emergency funds was inflation, closely followed by rising interest rates and recent changes in employment status, dissuading individuals from setting money aside. While the impact of inflation has left its mark on American savings habits, there is a glimmer of hope, with 19% of Americans mentioning that rising interest rates have motivated them to save more.

Despite external pressures, respondents expressed dissatisfaction with their savings situation, with 57% indicating that the current state of their savings is causing stress. Alarmingly, 22% of U.S. adults revealed having no emergency savings at all—a concerning statistic given that most Americans would require at least six months of emergency savings for day-to-day comfort.

Bankrate underscores the importance of prioritizing debt repayment and contributing to emergency funds, particularly during economically uncertain times, to mitigate the impact of income loss. The survey revealed that just over a third of respondents are currently balancing both debt repayment and saving efforts. Hamrick emphasized the opportune moment for those focused on building emergency savings to benefit from the increase in interest rates, suggesting high-yield savings accounts as a self-insurance policy against unforeseen expenses.

In summary, Hamrick highlighted that individuals at various life stages and income levels recognize the significance of avoiding the pitfalls associated with insufficient savings.