The results of a recent survey performed by personal finance website Bankrate.com are shocking, to say the least. Of 1000 adults questioned, 62% of them said that they had no emergency savings whatsoever!
Ironically, with the economy improving along with job security, many Americans were actually feeling a bit better overall, financially speaking. The results of this recent survey however show that this isn’t true, not by a long-shot.
When you consider that the cost of, for example, a major car repair can easily run upwards of $500 or more, and an emergency room visit can hit up your bank account for $1000 (easily), not having an emergency savings account to pay for those emergencies, especially if a person is living “paycheck to paycheck”, can be financially disastrous.
According to the survey, most Americans would raise that’s emergency money by reducing their spending on other items, Borrowing from either family or friends or by using the credit on their credit cards. While all of these are viable options, none of them are nearly as good as having an emergency savings account.
When you consider that a survey last year conducted by the US Federal Reserve, one that included 4000 adults, had very similar results, you begin to realize that the average American is either not making very much money or not putting nearly enough into savings as they should be.
What do these survey results actually mean?
Two takeaways from the results of these surveys are this; one, many Americans are living very precariously, financially speaking, and only one emergency away from a financial disaster. Two, most Americans don’t realize that putting money in an emergency savings account is vitally important.
While it’s true that it’s difficult to save money when one is living paycheck to paycheck, it still can be done, albeit at a slower rate. Even saving as little as $25 a week will put $1300 into savings at the end of one year. Double that, and put $50 a week aside, and you’ll have nearly $3000. It’s not a king’s ransom but it will certainly cover a wide variety of emergencies without forcing a person to use high interest credit cards, payday loans or their family to pay them.
When you consider that most people spend between $25 and $50 a week on things like cigarettes, alcohol, expensive coffees from Starbucks, eating out for lunch and clothing that they don’t need, it really boggles the mind that most Americans have so little saved for a “rainy day”.
One bit of good news from the Bankrate Survey was that, in comparison to 2012, more Americans are using a household budget to keep their finances under control. Over 80% responded that yes, they do use a budget, meaning that when it comes to finding ways to cut down on spending, and thus find money to put into an emergency savings account, they already are a step ahead.