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A majority of Americans say a $1,000 emergency expense would be too great of a hit to their savings and that they could not afford it, according to new data released Wednesday.
Bankrate's latest survey results found 56% of U.S. adults lack the emergency funds to handle a $1,000 unexpected expense and one-third (35%) said they would have to borrow the money somehow to pay for it.
Most U.S. adults say they can not afford to pay a $1,000 emergency expense from their savings. (iStock / iStock)
Of those, 21% said they would likely put such an expense on a credit card, while 10% said they would borrow the funds from a family member or friend, and 4% said they would take out a personal loan. Sixteen percent said they would reduce their spending in other areas to cover the bill.
"All too many Americans are playing with fire when it comes to their personal finances in the sense that they don’t have more in emergency savings," said Bankrate senior economic analyst Mark Hamrich. "Inflation has been a key culprit standing in the way of further progress on the savings front."
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Perhaps unsurprisingly, the older the respondent was, the more likely they were to say they could pay for a $1,000 expense from their savings.
Fifty-nine percent of baby boomers (ages 60-78) said they could handle a $1,000 expense, followed by 43% of millennials (ages 28-43), 36% of Gen Xers (ages 44-59) and 31% of Gen Zers (ages 18-27.)
Customers shop at a grocery store in the Brooklyn borough of New York on Dec. 13, 2022. Inflation has risen more than 17% since January 2021. (Michael Nagle/Xinhua via Getty Images / Getty Images)
"On the one hand, it is remarkable that more individuals and households do not have more funds at their disposal to respond to unexpected expenses," Hamrich said. "Historically high inflation has certainly taxed household budgets in recent years, but we are seeing improvement in this department with real wages on the rise."
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Inflation has cooled considerably from a peak of 9.1% notched during June 2022 to 3.4% year-over-year in December. Yet, when compared with January 2021, shortly before the inflation crisis began, prices are up a stunning 17.6%.
The sharp price increases have squeezed U.S. household budgets and led to Americans putting more everyday expenses on credit cards. Although the Federal Reserve's aggressive rate hike campaign has caused inflation to ease, credit card balances are accelerating as the average annual percentage rate hit a new record of 20.72%, according to Bankrate data from earlier this month.
The average credit card interest rate hit a record 20.72% earlier this month. (Robert Nickelsberg/Getty Images / Getty Images)
"The good news is that inflation is receding and the highest yields, in terms of returns on savings, remain the most favorable we’ve seen in many years," Hamrich said.
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"There’s no better time than the present to prioritize emergency savings," he added. "Otherwise, potentially costly borrowing rates will come into play, particularly with the average for credit rate interest rates close to 21%. That’s the other, expensive side of the proverbial high interest rate environment coin."
FOX Business' Megan Henney contributed to this report.
FAQs
New study exposes finances of Americans: Most can't handle a $1,000 emergency expense. 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.
How many Americans can't afford an emergency expense? ›
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.
Is $1000 a good emergency fund? ›
If you make more than $20,000, then aim for at least $1,000. Once you have paid down debt and can meet all of your other expenses, continue to add to your emergency savings account until you have enough so that you could live without a paycheck for six months.
Do the majority of Americans save or have an adequate emergency fund? ›
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 much money is enough for emergency? ›
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.
How many Americans have $1,000 dollars for emergency? ›
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.
How many Americans have 100k saved? ›
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.
Do rich people need emergency funds? ›
Even billionaires need to keep an 'emergency fund'. And the billionaire emergency fund should be grand, at least several million. Not only are there wealthy folks without savings, there are high income earners plagued with debt and a negative net worth.
Is 100k emergency fund too much? ›
But some people may be taking the idea of an emergency fund to an extreme. In fact, a good 51% of Americans say $100,000 is the savings amount needed to be financially healthy, according to the 2022 Personal Capital Wealth and Wellness Index. But that's a lot of money to keep locked away in savings.
Is $20000 too much for an emergency fund? ›
Depositing $20,000 in a savings account is wise when you have a plan for the money, such as a near-term expense or rainy day fund. For long-term goals, like retirement, you might be better served by opening a brokerage account or certificate of deposit (CD).
Key Findings. 48.6% of Americans consider themselves to be “broke,” and 66.2% feel they are “living paycheck to paycheck.”
Do 90% of millionaires make over 100k a year? ›
Choose the right career
And one crucial detail to note: Millionaire status doesn't equal a sky-high salary. “Only 31% averaged $100,000 a year over the course of their career,” the study found, “and one-third never made six figures in any single working year of their career.”
How many Americans 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
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.
Is $5,000 enough for emergency fund? ›
Saving $5,000 in an emergency fund can be enough for some people, but it is unlikely sufficient for a family. The amount you need in your emergency fund depends on your unique financial situation.
Is $10,000 too much for an emergency fund? ›
Those include things like rent or mortgage payments, utilities, healthcare expenses, and food. If your monthly essentials come to $2,500 a month, and you're comfortable with a four-month emergency fund, then you should be set with a $10,000 savings account balance.
How many Americans struggle to pay bills? ›
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.
What percentage of Americans are debt free? ›
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.
How many Americans have a 6 month emergency fund? ›
Recent data from Webster Bank finds that 57% of Americans consider saving for emergencies a top financial priority. But unfortunately, a good 31% of Americans don't have emergency cash reserves. And only 23% have an emergency fund that could cover more than six months of expenses.
How many people struggle with saving money? ›
(TND) — Over half of American workers are struggling to save for retirement or emergencies, according to Bankrate survey results published Monday. Overall, 53% said it was either difficult or impossible to consistently save enough.
