by Bethany Blankley
A majority of Americans polled said they couldn’t afford to pay emergency expenses or cover their living expenses for just one month if they lost their primary source of income, according to Bankrate’s latest Annual Emergency Savings Report. The main reason cited is record-high inflation.
The majority surveyed, 68%, said they’re “worried they wouldn’t be able to cover their living expenses for just one month if they lost their primary source of income.”
Nearly half surveyed in the Feb. 23 report, 49%, said they have less savings (39%) or no savings (10%) compared to a year ago.
“It’s clear that the less-than-optimal economy, including historically high inflation coupled with rising interest rates, has taken a double-edged toll on Americans,” Bankrate senior economic analyst Mark Hamrick said. “Many have resorted to tapping their emergency savings if they have it, or have taken on credit card debt, or some combination.”
A majority, 68%, said they couldn’t save or were saving less because of inflation, up from 49% last year, the report found. Another 44% said changes in income and employment were “holding them back.”
When broken down by age group, 85% of Generation Z (ages 18-26) and 79% of Millennials (ages 27-42) said they were more worried about being unable to cover emergency expenses than other age groups.
Younger generations have the least amount of savings, the report found. Millennials were most likely to have more credit card debt than emergency savings, with 45% saying they have more debt. Generation X (ages 42 to 57) saw the largest jump, with the report finding 44% say they have more credit card debt than savings, up from 24% last year.
By contrast, only 25% of baby boomers (ages 59 to 77) say they have more credit card debt than savings.
Overall, roughly 43% of adults surveyed said they’d pay for an emergency expense from their savings, with lower-income households, women and younger generations being less likely to do so.
In 2022, the Federal Reserve Bank raised interest rates seven times, it said, to combat rising inflation. Since then, prices have only gone up, not down.
In addition to not being able to save, Americans are going into debt to make ends meet, the report found. One-quarter said they would go into credit card debt to pay a $1,000 emergency expense and pay it off over time—the highest percentage claiming to do so since polling started in 2014, Bankrate says.
“With one in four Americans telling us they’d react to a large emergency expense by using a credit card, their timing couldn’t be worse,” Hamrick said. “On average, credit card interest rates are the highest we’ve seen and are slated to go higher as the Federal Reserve continues to hike. Under the best of circumstances, this debt should be paid before costly interest charges hit the account.”
Another 36% said they have more credit card debt than emergency savings — the highest on record since 2011, Bankrate said. Among them, 40% are in their prime working years, between the ages of 27 and 58.
The good news, Bankrate notes, is that 51% surveyed said they have more emergency savings than credit card debt.
Worse news is that 13% said they have no credit card debt and no savings, which Hamrick says is a high percentage.
The report, released late last month, includes findings from two surveys conducted between Dec. 16-19, 2022, among 1,028 respondents, and between January 20-23, 2023, among 1,032 respondents. They were conducted in English and Spanish and over the Internet and by phone. The margin of error is 3.5 +/- for the December survey and 3.7 +/- for the January survey. Data was also weighted to represent the target population, the report states.
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Bethany Blankley is a contributor to The Center Square.
Photo “Paying Bills” by Karolina Grabowska.
