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A little over half of Americans think they don't have enough in emergency savings, a new report from Bankrate has found. The rate of respondents who say they have sufficient emergency savings to cover three month's worth of expenses is at 48%–similar to 2022, when inflation was at a 40-year high.
It's possible that ongoing concerns about inflation, and talk of a recession, has focused Americans on the issue more than in the past, and the bad economic news has people worried, according to Greg McBride, chief financial officer with Bankrate. "The economic gyrations over the past four years have underscored the importance of having emergency savings, with an increasing share of Americans thinking it will take a bigger savings cushion to feel comfortable with it," he said.
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Key findings point out anxiety over savings
The study found a number of signs that Americans are worried about their ability to save for emergencies. The data showed that 57% of respondents were uncomfortable with the amount of emergency savings they currently have. As of January, 36% have more credit card debt than they do emergency savings—which Bankrate officials say is a record high since 2011. And only a minority—43%–would pay for unexpected emergency expenses from their savings.
Again, the economy is on the minds of Americans—74% said economic factors are causing them to save less at the moment, including 68% who say inflation is to blame (an increase from 49% last year) and 44% who say changes in income and employment are hampering their ability to save.
On a more positive note, the percentage of Americans who have no emergency savings at all has dropped—with 22% of respondents saying they have no emergency savings. That's the second-lowest percentage in 13 years of polling. Younger Americans are more likely to be in this group, with 31% of Gen Z'ers (ages 18-26) lacking emergency savings. That's just more than twice the number of baby boomers with (ages 59-77) who say they have no savings (15%).
Financial insecurity can affect retirement savings
Officials with Bankrate note worries about emergency savings can have an impact on other areas of financial health, such as retirement savings. "Retirement savings can often be a casualty for those who have inadequate emergency savings," said Bankrate's Senior Economic Analyst Mark Hamrick., "In fact, some individuals and households tap retirement savings when the going gets rough, which can have the unfortunate long-term impact of diminishing their resources and quality of life when it comes time to retire. Other aspects of financial insecurity can involve taking on too much debt or having inadequate resources to pay down or off debt to the degree that had earlier been envisioned."
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Hamrick said the ability of Americans to achieve their financial goals depends on several factors, including financial literacy, the state of the economy, and the marketplace. He said that employers can be part of the solution by providing savings tools and resources. And the financial system itself has some self-correcting mechanisms, he noted. "One unintended benefit of the Federal Reserve-engineered rising interest rate environment is the superior returns on savings being paid, including through high yield savings," Hamrick said. "This is helping to shine a spotlight on the opportunity to save for both short-term and intermediate-term goals."
He added that companies who build trust with employees can be helpful in this area. "By providing information, whether in-person for virtually on the need to save for retirement, beginning at early stages in one's career, employers will be doing their team members a favor," he said. "Of course, retirement plans such as the 401(k) have become the primary means through which workers save with assistance from their employers. There might be a temptation for some workers to maximize their take home pay while thinking that retirement savings can wait for another day in the future. But it is clear that more Americans need to prioritize retirement savings, as well as saving for emergencies."
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