SEATTLE, Wash. — Saving money is crucial - but how we spend that money is becoming a problem according to a study by Bankrate. According to the newest survey, only 44% of U.S. adults say they would pay an emergency expense of $1,000 or more from their savings.
That means the money is likely coming from credit cards. And, Bankrate Analyst Mark Hamrick says that is a problem.
“One of the worst options in managing through an unexpected expense is to have to borrow and among the borrowing that you can do is the costliest is to lean on credit card debt which only puts you farther behind in attaining your financial goals.”
Why is this happening? 63% of those surveyed blame rising inflation as the cause for saving less. 45% point the finger at rising interest rates. And, a shocking number reported having no savings at all.
“We really do risk some nasty outcomes here - 1 in 5 has nothing. Some people are really having a rough time of it with their money.”
Age also matters, Gen Z said it was most uncomfortable with its level of emergency savings while Baby Boomers were the most comfortable.
“We’re not living our best lives if we’re running out of money at the end of the paycheck because we’re trying to make our lives look good on social media.”
The ideal way to prepare for an emergency is to have 2-6 months of your salary put aside. A good idea is to have a direct deposit going into a separate account and a little bit out of each paycheck won’t feel like a burden and can save you in the long run.
Also, where you put your rainy day funds matter.
There are three things to consider:
- Is your reserve protected from loss? In other words not in a risky investment.
- Is it liquid so you can access it immediately.
- Make sure you are earning a return to fight inflation.
“We just wish that more Americans would take the action Item from this survey and to prioritize emergency savings, particularly at a time when the returns on savings are some of the best we’ve seen In a generation,” says Bankrate.
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