Inflation, plunging stocks and worries about what havoc a recession could bring has lowered Americans' economic confidence to its lowest level since the Great Recession.
Now Americans have an additional worry: meager emergency savings.
A recent Bankrate survey published June 23rd found that nearly six in 10, 58%, of Americans are nervous about the amount of their emergency savings account, up from 44% in 2020.
They have reason for concern. A lousy $2,000 is the median amount in Americans’ emergency funds, according to the Federal Reserve—and 36% don’t have enough money to cover a $400 emergency. All told, 35% of Americans have total savings—including funds earmarked for retirement—of $1,000 or less.
Just about one-third, 32%, are “very uncomfortable” with their level of emergency savings, and among this group, 75% say they don’t have enough money to cover at least three months of living expenses, which is the rule of thumb most financial planners give for emergency savings.
On the other hand, 13% are “very comfortable” with their level of savings, and this buffer zone rises the more that a person’s earns. Fifty-nine percent of those earning over $100,000 said they’re comfortable with their level of savings, compared with a minority, 46%, of those earning below $100,000 reporting the same.
Among households that earned below $50,000 per year, Bankrate found that 37% had no emergency savings in their bank accounts at all.
24% Saving More
Compared with a year ago, just 24% of respondents reported having more savings, but a higher amount, 34%, responded they have less savings now than last year.
The survey also found older Americans are better equipped to cover sudden emergencies from their savings than younger Americans. Millennials have notably less in savings than older generations; 40% of Millennials (ages 26-41) reported they could cover three months’ worth of expenses with their savings, and this rises to 47% of Gen X (ages 42-57) and 62% of Baby Boomers (ages 58-76).
Paycheck to Paycheck
Rising inflation has forced more Americans to live paycheck to paycheck, and putting money aside is a struggle for more people. Fifty-eight percent of Americans, about 150 million adults, are living paycheck to paycheck, up from 54% in May 2021, a new LendingClub report found.
While lower incomes generally correlate with financial distress, the report found even 36% of those earning $250,000 or more annually are living paycheck to paycheck.
Twenty-two percent of those earning more than $250,000 annually have three credit cards, and 31% have an average or below-average credit score, signaling how far-reaching today’s 8.6% inflation has become for people of all walks of life.
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