Survey reveals majority of Americans lacking emergency savings.
Americans Falling Behind on Savings, Survey Shows
A recent survey conducted by Bankrate revealed that a large majority of Americans are struggling to increase their emergency savings. In fact, a staggering 81 percent of respondents admitted that they have not been able to boost their savings since the beginning of the year.
The survey, released on Oct. 25, showed that only 19 percent of American households managed to increase their emergency savings. On the other hand, 32 percent reported having less savings compared to the start of 2023. Additionally, 30 percent had the same amount of savings, while 20 percent had no emergency savings at all.
Interestingly, the survey found that older generations tend to have even less emergency savings now than they did at the beginning of the year.
Related Stories
- What to Do If You’re 60 Without Retirement Savings – Published on 9/14/2023
- Two-Thirds of Workers Say Inflation Is Outpacing Wage Gains: Survey – Published on 9/26/2023
According to the survey, households with an income over $100,000 tend to have more savings now compared to the beginning of the year.
The survey also highlighted that 60 percent of Americans are falling behind on their emergency savings. Of those, 38 percent said they are significantly behind, while 22 percent admitted to being slightly behind.
Among those struggling to save, 13 percent believed they would never be able to catch up, while 22 percent were uncertain about the time it would take to get back on track.
The survey further revealed that inflation is the main obstacle preventing Americans from increasing their savings. Fifty-seven percent of households that experienced no increase in savings blamed inflation, while 38 percent cited excessive expenses as the reason for their financial setback.
“Just 19 percent have increased their emergency savings balances since the beginning of the year. Rising prices and high household expenses have been the predominant impediments to boosting emergency savings,” said Bankrate’s chief financial analyst, Greg McBride.
The survey, conducted online from Sept. 20 to 22, included 2,496 adults.
Tap Savings for Consumption
The Federal Reserve Bank of New York reported on Oct. 11 that Americans’ disposable income has declined, leading to an increased reliance on savings to sustain consumption.
From the start of the pandemic in 2020 until the end of 2021, Americans’ excess savings grew to approximately $2.6 trillion, equivalent to 14 percent of their annual disposable income, according to the New York Fed.
However, U.S. excess savings have gradually decreased, reaching 10 percent of disposable income (or $1.9 trillion) by the second quarter of 2023.
Data for the first two months of the third quarter, as cited by the New York Fed, indicates that consumers have generally maintained their spending habits. However, with real disposable income decreasing, they have increasingly relied on their savings to sustain their shopping activities.
Withdrawals From Retirement Savings on the Rise
Amid persistent inflation, more Americans are resorting to hardship withdrawals from their retirement funds to cover emergency expenses. According to a report from Fidelity Investments, hardship withdrawals from 401(k) accounts have tripled from 2.1 percent in 2018 to 6.9 percent in 2023.
Furthermore, Vanguard reported that hardship withdrawals have doubled from a monthly rate of 2.1 transactions per 1,000 participants in 2018 to 4.3 in 2022.
Inflation Eroding Living Standards
Nearly 50 percent of Americans believe that high prices are negatively impacting their living standards. This figure matches the all-time high recorded in July 2022, when inflation was on the verge of reaching double digits.
The latest University of Michigan Surveys of Consumers report, released on Oct. 13, revealed that 49 percent of consumers surveyed in early October stated that high prices were eroding their living standards. This represents a significant increase from the previous month’s 39 percent and matches the previous record set in July 2022.
Inflation, as measured by the Consumer Price Index (CPI), experienced a rapid surge throughout 2021, narrowly missing the 10 percent mark by mid-2022. In June 2022, inflation peaked at 9 percent, a multi-decade high that later dropped to 3.1 percent by June 2023. However, inflation rose again to 3.7 percent in August and September, reigniting concerns.
Furthermore, year-ahead inflation expectations rose from 3.2 percent in September to 3.8 percent in early October, according to the University of Michigan survey. Longer-term inflation expectations also increased to 3 percent this month from 2.8 percent last month.
What strategies can individuals and households implement to increase their savings and prioritize saving for emergencies? Additionally, how can policymakers and financial institutions work together to create an environment that encourages and supports saving
Americans are now dipping into their savings to sustain their consumption. This trend is concerning, as it indicates a lack of financial security and the potential for future financial hardships.
The decline in disposable income can be attributed to several factors, including inflation and excessive expenses. As prices rise and household expenses increase, Americans are finding it more difficult to allocate money towards emergency savings. This is particularly worrying considering the uncertain economic climate and the possibility of unexpected expenses or emergencies.
The survey conducted by Bankrate also highlighted the generational differences in savings habits. Older generations, who are typically expected to have more savings due to their longer time in the workforce, reported having even less emergency savings now compared to the beginning of the year. This could be a result of several factors, such as increased healthcare costs or a lack of financial planning for retirement.
It is crucial for individuals and households to prioritize saving for emergencies, as unexpected expenses can arise at any time. Without a sufficient emergency fund, Americans are left vulnerable to financial setbacks and may have to rely on credit or loans to cover these expenses, further exacerbating their financial situation.
To address this issue, individuals and households should consider implementing various strategies to increase their savings. This may include cutting back on unnecessary expenses, creating a budget, and exploring additional sources of income. It is also advisable to seek financial advice from professionals who can provide guidance on effective saving strategies and investments.
Furthermore, policymakers and financial institutions should take note of these survey findings and work towards creating an environment that encourages and supports saving. This may involve implementing policies that address rising inflation and reducing excessive expenses. Financial institutions can also provide more accessible and attractive options for saving, such as high-interest savings accounts or investment opportunities with low risk.
In conclusion, the survey conducted by Bankrate clearly demonstrates the alarming trend of Americans falling behind on their emergency savings. With the majority of respondents reporting no increase in savings and many admitting to being significantly behind, it is evident that urgent action is needed to address this issue. By prioritizing savings and implementing effective strategies, individuals and households can work towards achieving financial security and protecting themselves from future financial hardships.
" Conservative News Daily does not always share or support the views and opinions expressed here; they are just those of the writer."
*As an Amazon Associate I earn from qualifying purchases
Now loading...