Americans are feeling better about their job security and the economy, but most are theoretically only one paycheck away from the street.
Approximately 62% of Americans have no emergency savings for things such as a $1,000 emergency room visit or a $500 car repair, according to a new survey of 1,000 adults by personal finance website Bankrate.com. Faced with an emergency, they say they would raise the money by reducing spending elsewhere (26%), borrowing from family and/or friends (16%) or using credit cards (12%).
“Emergency savings are not just critical for weathering an emergency, they’re also important for successful homeownership and retirement saving,” says Signe-Mary McKernan, senior fellow and economist at the Urban Institute, a nonprofit organization that focuses on social and economic policy.
The findings are strikingly similar to a U.S. Federal Reserve survey of more than 4,000 adults released last year. “Savings are depleted for many households after the recession,” it found. Among those who had savings prior to 2008, 57% said they’d used up some or all of their savings in the Great Recession and its aftermath. What’s more, only 39% of respondents reported having a “rainy day” fund adequate to cover three months of expenses and only 48% of respondents said that they would completely cover a hypothetical emergency expense costing $400 without selling something or borrowing money.
Why aren’t people saving? “A lot of people are in debt,” says Andrew Meadows, a San Francisco-based producer of “Broken Eggs,” a documentary about retirement. “Probably the most common types of debt are student loans and costs related to medical issues.” He spent seven weeks traveling around the U.S. and interviewed over 100 people about why they haven’t saved enough money. “People are still feeling the heat from the Great Recession.” Some 44% of senior citizens have enough savings to cover unexpected expenses versus 33% of millennials, Bankrate.com found.
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