(The Center Square)
According to Bankrate’s latest annual emergency savings report, most Americans surveyed said they could not pay emergency expenses or cover their living expenses for just one month if they lost their primary source of income. The main reason cited is record-high inflation.
A majority of those surveyed, 68%, said they were “worried that they would not be able to cover their living expenses for just one month if they lost their primary source of income.”
Nearly half of those surveyed in the Feb. 23 report, 49%, say they have less savings (39%) or no savings (10%) compared to a year ago.
“It’s clear that a less-than-ideal economy, including historically high inflation and rising interest rates, has taken a double-edged toll on Americans,” said Bankrate senior economic analyst Mark Hamrick. “Many have resorted to tapping into their emergency savings or taking out credit card debt or some combination.”
RELATED: Record number of Americans say they’re economically worse off under Biden — most in nearly 4 decades
A majority, 68%, said they could not 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 not being able to afford emergency expenses than other age groups.
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The younger generation has the least amount of savings, the report said. Millennials have more credit card debt than emergency savings, with 45% saying they have more debt. Generation X (ages 42 to 57) saw the biggest jump, with 44% reporting they have more credit card debt than savings, up from 24% last year.
In contrast, only 25% of baby boomers (ages 59 to 77) say they have more credit card debt than savings.
Overall, about 43% of adults surveyed said they need to use their savings to pay for emergency expenses, with low-income families, women and the younger generation least likely to do so.
In 2022, the Federal Reserve Bank raised interest rates seven times to combat rising inflation. Since then, prices have only gone up, not down.
Related: Inflation may be slowing, but the long-term damage is already done
In addition to being unable to save, the report found that Americans are going into debt to make ends meet. A quarter said they would go into credit card debt to pay a $1,000 emergency expense and pay it off over time — a higher percentage of people saying so since the poll began in 2014, Bankrate says.
“With one in four Americans saying they would respond 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 will likely go higher as the Federal Reserve continues to hike. In the best cases, this debt should be paid off before the higher interest rates come into play.
Another 36% said they have more credit card debt than emergency savings — the highest on record since 2011, Bankrate said. Of them, 40% are in their prime working years between 27 and 58.
The good news, Bankrate notes, is that 51% of those surveyed said they have more emergency savings than credit card debt.
The bad news is that 13% said they had no credit card debt and no savings, a high percentage, Hamrick says.
The report, released late last month, includes findings from two surveys conducted among 1,028 respondents between December 16-19, 2022 and 1,032 respondents between January 20-23, 2023. 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 is also weighted to represent the target population, the report says.
Syndicated with permission from The Center Square.