Mounting financial pressure means Americans have less in their bank accounts

It’s no secret that many Americans are facing severe financial pressure. While inflation may be slowly evening out, prices for many everyday expenses remain high. To add to that, high interest rates are creating larger mortgage and car payments for many consumers. With the cost of living so elevated, many Americans find themselves living paycheck to paycheck.

All of this mounting financial pressures is impacting Americans’ ability to save money and build wealth. A recent GOBankingRates survey found that nearly half (49%) of Americans live paycheck to paycheck throughout the entirety of the year, with an additional 22% live paycheck to paycheck at least part of the year.

To better understand how the economy is impacting Americans’ bottom line, the survey spanned more than 1,000 Americans ages 18 and older to find out how much Americans have in their savings and checking accounts.

• 38% of respondents have $100 or less in their checking accounts
• 36% of respondents have $100 or less in their savings accounts
• 50% of respondents have less than $500 in savings

With many Americans having low checking account balances, it’s no surprise that overdrafting is a frequent occurrence. The survey found that 28% of Americans have had an overdraft on their checking account in the past year, with 6% admitting that overdrafting is a frequent occurrence. Millennials are the most likely to have overdrafted their accounts, while Americans ages 65 and up were the least likely.

While the exact amounts needed will depend on the individual, it’s likely that the $100 many Americans keep in these accounts is not enough.

“The right checking and savings balances are unique to your financial situation,” said Seth Diener, private wealth manager at Diener Money Management. “Assess your expenses, income stability and risk tolerance to determine how much you feel comfortable keeping readily available.”

“Try to have 3 to 6 months of living expenses in a savings account for an emergency fund,” Diener said. “This helps cover unexpected costs without going into debt. If you have under three months of expenses saved, make building up your emergency fund a priority.”

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As for checking accounts, Diener advises, it’s advantageous to have more than enough to cover your monthly expenses.

“Aim to keep one to two months of living expenses in your checking account as a buffer,” Diener said. “This helps avoid overdraft fees and having to transfer from savings frequently.”