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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."
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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."
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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.
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"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
New study exposes finances of Americans: Most can't handle a $1,000 emergency expense. 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.
How many Americans can't afford an $1000 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.
Is it true the majority of Americans do not have an adequate emergency fund or sufficient amounts of money saved for retirement? ›
And according to Federal Reserve data, most Americans don't have nearly enough money saved up. Developing a savings plan should begin as soon as you enter the working world and continue all the way into retirement.
Do most Americans have a emergency fund? ›
Most American adults don't have enough savings to pay an emergency $1,000 expense. 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.
Is the American emergency fund a real thing? ›
The American Rescue Plan Act of 2021 established a new $1 billion Pandemic Emergency Assistance Fund to assist needy families impacted by the COVID-19 pandemic. States, the District of Columbia, tribes operating a tribal TANF program, and all five U.S. territories are eligible to receive funds.
Is $1,000 enough for emergency fund? ›
Starter emergency fund: If you have consumer debt, you need a starter emergency fund of $1,000. This might not seem like a lot, but it's just a temporary buffer while you pay off that debt. Fully funded emergency fund: Once that debt's gone, you need a fully funded emergency fund of 3–6 months of expenses.
How many Americans have 100k saved? ›
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.
Why are most Americans broke? ›
Experts Explain Why People Go Broke
It could be poor decision-making with credit, credit card abuse being one of the most challenging. It could be due to a lost job or a poor economy,” said Dr. Jacob Tenney, assistant professor and director of financial planning for the University of Charleston's School of Business.
What is the 50 30 20 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.
Do the majority of Americans not have savings? ›
Nearly Half of Americans Don't Have $500 in Savings
According to the survey, 49% of Americans have $500 or less in their savings account, with 36% reporting they have less than $100 saved up. This means that a small financial upset can cause these households to end up in debt — or more debt.
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 $100,000 too much 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? ›
Roughly 2 in 3 Americans Can't Cover a $500 Emergency.
How many Americans can afford a $1000 emergency? ›
Only 44% of Americans can afford a $1,000 emergency expense, says Bankrate.
Is $5,000 enough for emergency fund? ›
Saving $5,000 in an emergency fund can be enough for some people, but it is unlikely sufficient for a family. The amount you need in your emergency fund depends on your unique financial situation.
Is 30k enough for an emergency fund? ›
Most of us have seen the guideline: You should have three to six months of living expenses saved up in an emergency fund. For the average American household, that's $15,000 to $30,0001 stashed in an easily accessible account.
How many Americans can't handle a $500 emergency? ›
Roughly 2 in 3 Americans Can't Cover a $500 Emergency.
What is the average amount of emergency funds? ›
Generally, your emergency fund should have somewhere between 3 and 6 months of living expenses. 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.
How many Americans struggle to pay bills? ›
According to the 2024 Financial Literacy Survey by GOBankingRates, 13% of Americans do not currently bring in enough money to cover their bills, and 46% barely bring in enough to cover their bills.
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.
