Most Americans Lack Funds to Cover a Financial Emergency, Survey Finds

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Nearly two-thirds of Americans say they are living on the brink financially and worry that they would not be able to cover an unexpected expense or even a short-term loss of income, a new survey finds.

According to an Oct. 23 Bankrate survey, 62 percent of respondents said they did not have enough saved up to cover an emergency. This includes 26 percent who said they are “slightly behind” on emergency savings and 37 percent who said they are “significantly behind.” 

Only 23 percent said they felt “on track” with their emergency savings, and only 15 percent said they felt ahead of where they should be. In addition, only one in five respondents said they have more saved now than at the beginning of this year.

“Emergency savings have long been the Achilles’ heel for Americans and their finances, and despite a widespread recognition of that problem, there really hasn’t been any substantive progress in the right direction for years,” Greg McBride, Bankrate’s chief financial analyst, told The Epoch Times. “The bout of inflation and high prices that we’ve been dealing with over the last few years has only served to erode the savings, and buying power of savings, for many households.”The survey polled 2,511 U.S. adults and was conducted jointly with YouGov during September. This report is the latest indication that many Americans have lost their financial safety net and are now increasingly vulnerable to a medical emergency or other unanticipated expense. 

September’s numbers are slightly worse than Bankrate’s prior report in June, according to which 59 percent of those polled said they were uncomfortable with their level of emergency savings. That percentage has been rising, from 37 percent in 2018 to 44 percent in 2020, 48 percent in 2021, and 58 percent in 2022, falling by just 1 percent to 57 percent in 2023 before increasing again in 2024.

These reports appear to contradict U.S. aggregate employment and wage data, which have been generally positive. 

Despite edging up this year, unemployment remains low at 4.1 percent as of September, according to the Bureau of Labor Statistics. And wage growth, while trending down, is 4.7 percent as of September, according to data from the Federal Reserve. 

In addition, consumer spending has also held up thus far. U.S. Bank released a study on Oct. 11 that found retail sales were up by 2.3 percent for the three-month period ended in August and rose by 2.1 percent from levels a year ago. The report cited “a solid job market, low unemployment, and wage increases” as key strengths for personal finance.

Inflation Continues to Take a Toll

But the Bankrate survey suggests that these statistics don’t capture the entire picture, or Americans’ ongoing struggle to cope with inflation and higher interest rates. 

“A lot of that strength in consumer spending is just because things cost more, and so particularly for lower- and middle-income households, the spending is increasingly out of necessity rather than choice,” McBride said. “The economy looks a whole lot different on the ground that it does from 35,000 feet.”

And while the rate of inflation has come down this year, prices continue to rise from already historically high levels.

“Although inflation has largely plateaued, the price level remains high, and many people are just now beginning to feel the brunt of it because initially they avoided high prices whenever possible,” David Rose, an economist with the American Institute of Economic Research, told The Epoch Times. 

Inflation can be particularly devastating to retirees who are living off their savings rather than wages. They have seen more than 20 percent of the value of their dollars evaporate due to rising prices since 2020. 

Many Americans coped with inflation by putting off purchases of appliances or cars, or delaying home repairs as long as they could, he said. But that was only a temporary solution.

“Also, shelter costs—owned housing and rents—are still very high, and they occupy a large portion of the budget,” Rose stated, “so they eat up a great deal of disposable income that might otherwise have been saved.” 

With savings running low, many Americans are turning to debt to pay for essentials. 

A Bankrate survey released on Oct. 17 found that 37 percent of U.S. credit card holders have maxed out or nearly maxed out on their card limits, with the majority stating inflation or unexpected emergency expenses as the reason. In addition, the fourth-quarter 2023 Quarterly Credit Industry Insights Report released in February by credit-rating company TransUnion stated that Americans’ credit card debt grew by 13 percent over the prior growth year, exceeding $1 trillion for the first time on record.

According to the Federal Reserve’s latest Quarterly Report on Household Debt and Credit, Americans’ total household debt rose by $109 billion in the second quarter of 2024, to $17.80 trillion. Mortgage balances increased by $77 billion, to $12.52 trillion; auto loans increased by $10 billion, to $1.63 trillion; and credit card balances increased by $27 billion, to $1.14 trillion. Homeowners also increase their borrowing under home equity lines of credit, upping their limits by $3 billion.

Source: Federal Reserve / Equifax / Americans' total debt is on the rise

Adding interest charges on top of the higher cost of food, gas, electricity, and other essentials has taken its toll on Americans’ ability to save.

“Despite the 50 basis-point cut last month, interest rates are still high,” Rose said. “High interest rates applied to record levels of household debt produces very high debt service, which makes saving even harder.”

Bankrate’s emergency savings survey also revealed a widening gap between American households who are prospering under the current economy and those who are falling behind. 

For those earning $100,000 or more, fewer than half (44 percent) said they were “behind” in their emergency savings, while 26 percent said they were “ahead.” By contrast, more than two-thirds of those earning less than $50,000 per year (71 percent) said they were behind, while only 11 percent said they were ahead. Of those earning $50,000 to $79,999, 62 percent said they were behind in emergency savings; and of those earning $80,000 to $99,999, 57 percent said they were behind.

‘Pay Yourself First’

For Americans who are finding themselves unable to save, McBride has some advice.

“Pay yourself first,” he said. “If you wait until the end of the month and try to save what’s left over, too often there’s nothing left over.

“Sign up for a direct deposit from your paycheck into a dedicated savings account. If you’re a freelancer or self-employed and you don’t get a regular paycheck, you can accomplish the same thing with an automatic transfer from your checking to your savings account on a regular basis.”