Bank of America CEO and Chairman Brian Moynihan discusses the Fed's rate hikes, 2024 consumer strength and big bank regulation.
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."
MAJORITY OF AMERICANS FEEL US ECONOMY IS IN RECESSION: SURVEY
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."
CREDIT CARD DELINQUENCIES SURGE AS AMERICANS BATTLE HIGH INFLATION, INTEREST RATES
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.
GET FOX BUSINESS ON THE GO BY CLICKING HERE
"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
Bankrate found that only 44% of Americans surveyed could afford a $1,000 emergency expense. That number is actually up one percentage point from the previous year, the company said. Those 56% of Americans who couldn't weather the storm said they would address that unexpected emergency charge in other ways.
What percentage of Americans can t afford $1,000 emergency? ›
(KTLA) — A $1,000 unexpected emergency expense could derail the lives of more than half of all Americans, according to a new survey. The survey was conducted by Bankrate, a financial analysis and comparison site. Bankrate found that only 44% of Americans surveyed could afford a $1,000 emergency expense.
What of Americans have less than $1000 saved for an emergency fund? ›
But only 44% of Americans are prepared for a $1,000 emergency expense, according to a survey from financial analysis site Bankrate. While a percentage point higher than last year, most people still say they would be derailed by such a crisis.
How do most people who do not have emergency funds pay for their emergencies? ›
Without requisite savings, 35% of respondents said they'd borrow the money, either from friends and family, a personal loan, or putting it on a credit card. While nobody really wants to tap into their emergency savings, most Americans couldn't even afford to do so if they had to.
Do the majority of Americans save or have an adequate emergency fund? ›
Nearly one in three (30 percent) people in 2023 had some emergency savings, but not enough to cover three months of expenses. This is up from 27 percent of people in 2022. Note: Not all percentages total 100 due to rounding. Also, nearly one in four (22 percent) U.S. adults said they have no emergency savings.
What percent of Americans can't afford emergency? ›
Fewer than half of Americans, 44%, say they can afford to pay a $1,000 emergency expense from their savings, according to Bankrate's survey of more than 1,000 respondents conducted in December. That is up from 43% in 2023, yet level when compared to 2022.
Is $1,000 enough for emergency fund? ›
How Much You Should Have in Your Emergency Savings. Here's a Dave Ramsey principle we agree with: If you make less than $20,000 per year, aim to have at least $500 in emergency savings. If you make more than $20,000, then aim for at least $1,000.
Can $1,000 last a month? ›
The harsh truth is that $1,000 per month is very hard to live on, even if you lower your costs to the bare minimum. With inflation causing the prices of goods and services to increase every year, $1,000 a month will become harder and harder to live on going forward.
Is 100k enough for an emergency fund? ›
Now if you happen to spend $20,000 a month, then sure, $100,000 is a reasonable amount to put in your emergency fund. But most of us don't spend that much on a monthly basis -- not even close.
Can Americans afford a 500 dollar emergency? ›
Do This if You're in That Boat. Without emergency savings, you might end up in debt the moment an unplanned bill arises. Putting your savings on autopilot could help grow your cash reserves over time.
About 29% of respondents have between $501 and $5,000 in their savings accounts, while the remaining 21% of Americans have $5,001 or more. Few hold much cash in their checking accounts as well. Of those surveyed, 60% report having $500 or less in their checking accounts, while only about 12% have $2,001 or more.
How can I get a $1000 emergency fund? ›
Choose a traditional savings account or a short-term certificate-of-deposit (CD), currently the most attractive accounts. (Early withdrawal penalties on a CD rarely lower the yield below that of a savings account.) Consider opening a new account or sub-account for this money so you're not tempted to spend it.
What is the 50 20 30 rule? ›
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. Let's take a closer look at each category.
How many people have $1000000 in savings? ›
In fact, statistically, around 10% of retirees have $1 million or more in savings.
How much money does the average American have in their bank account? ›
While the median bank account balance is $8,000, according to the latest SCF data, the average — or mean — balance is actually much higher, at $62,410.
What is the best state to save money? ›
North Dakota tops the list as the best place to live to save money. This midwestern state boasts the third-lowest debt-to-income ratio in the country as of Q3 2023, meaning North Dakotans have a light debt load relative to their earnings compared to other states. Housing costs are also quite affordable in North Dakota.
How many Americans can afford a $1000 unexpected expense? ›
Only 44% of Americans can afford a $1,000 emergency expense, says Bankrate.
Do 45% of Americans have less than $1000 saved for an emergency? ›
The survey revealed that 36% of all Americans have absolutely no savings at all, and another 19% have less than $1,000 saved. Just 45% of all Americans have $1,000 or more in savings. These were the savings account balances as of the third quarter of 2022.
How much do most Americans have in an emergency fund? ›
About 29% of respondents have between $501 and $5,000 in their savings accounts, while the remaining 21% of Americans have $5,001 or more. Few hold much cash in their checking accounts as well. Of those surveyed, 60% report having $500 or less in their checking accounts, while only about 12% have $2,001 or more.
What is a good amount of money to have for an 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.
