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
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.
What percentage of Americans can t afford a $1,000 dollar emergency? ›
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.
Do most Americans have an adequate emergency fund? ›
Over 1 in 4 people have no emergency savings. Keeping at least three months of expenses saved can help you weather a job loss, major unexpected bill or other sudden expense. However, 27 percent of U.S. adults have no emergency savings at all, the highest percentage since Bankrate asked the question in 2020.
What percentage of Americans have a 3 month 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? ›
Generally, your emergency fund should have somewhere between 3 and 6 months of living expenses. 1 That doesn't mean 3 to 6 months of your salary, but how much it would cost you to get by for that length of time.
Is a $1,000 emergency fund enough? ›
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.
How many Americans have $100,000 in savings? ›
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.
Can Americans afford a 500 dollar emergency? ›
We're often told to “expect the unexpected,” but when it comes to our finances, many Americans aren't following this advice. A recent study conducted by emergency savings startup SecureSave found that six out of 10 employees would be unable to cover a $500 emergency expense, such as a hospital bill or car repair.
Do 90% of millionaires make over 100k a year? ›
Ninety-three percent of millionaires said they got their wealth because they worked hard, not because they had big salaries. Only 31% averaged $100,000 a year over the course of their career, and one-third never made six figures in any single working year of their career.
What is the 50 30 20 rule? ›
The 50/30/20 budget rule states that you should spend up to 50% of your after-tax income on needs and obligations that you must have or must do. The remaining half should be split between savings and debt repayment (20%) and everything else that you might want (30%).
Average household checking account balance by gender
| Gender of reference person | Average checking account balance in 2022 | Median checking account balance in 2022 |
|---|
| Male | $20,221.19 | $3,800.00 |
| Female | $8,272.74 | $1,200.00 |
Oct 18, 2023
How Many Americans Are Living Paycheck to Paycheck? A 2023 survey conducted by Payroll.org highlighted that 78% of Americans live paycheck to paycheck, a 6% increase from the previous year. In other words, more than three-quarters of Americans struggle to save or invest after paying for their monthly expenses.
How many Americans have $1000 in the bank? ›
The numbers are consistently around 60%, meaning only 40% of Americans have enough savings to cover an unexpected expense without going into debt. As of January 2023, the report shows that 57% of Americans have less than $1,000 in savings.
Is $20000 enough for an emergency fund? ›
A $20,000 emergency fund might cover close to three months of bills, but you might come up a little short. On the other hand, let's imagine your personal spending on essentials amounts to half of that amount each month, or $3,500. In that case, you're in excellent shape with a $20,000 emergency fund.
What is the right amount of cash to keep at home? ›
“It [varies from] person to person, but an amount less than $1,000 is almost always preferred,” he said. “There simply isn't enough good reason to keep large amounts of liquid cash lying around the house.
Is $5,000 enough for emergency fund? ›
For many people, $5,000 would be inadequate to cover several months' expenses in the event of job loss or an expensive emergency. If that is the case for you, $5,000 would not be considered an overfunded account.
How many Americans can't handle a $500 emergency? ›
Roughly 2 in 3 Americans Can't Cover a $500 Emergency.
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. The exact definition of debt free can vary, though, depending on whom you ask.
Can you survive with $1,000 dollars? ›
But it is possible to live well even on a small amount of money. Surviving on $1,000 a month requires careful budgeting, prioritizing essential expenses, and finding ways to save money. Cutting down on housing costs by sharing living spaces or finding affordable options is crucial.
What percent of Americans live paycheck to paycheck? ›
How Many Americans Are Living Paycheck to Paycheck? A 2023 survey conducted by Payroll.org highlighted that 78% of Americans live paycheck to paycheck, a 6% increase from the previous year. In other words, more than three-quarters of Americans struggle to save or invest after paying for their monthly expenses.
