Less than fifty percent of Americans could afford a last-minute, $1,000 emergency, like an unexpected car repair or visit to the emergency room, shedding light on just how hard inflation and other factors are hitting Americans’ finances.
Bankrate, a personal finance company, released the results of a survey that polled 1,004 U.S. adults in January and found that only 44 percent had enough money saved to cover an unplanned expense, while also reflecting the highest percentage capable of covering such an expense in the last eight years of polling.
Though an improvement, Greg McBride, chief financial analyst for Bankrate, said it still indicates a majority of Americans cannot afford a potential emergency.
“The reliance on borrowing is still high, with more than one-third of households having to turn to a credit card, personal loan, or family and friends in the face of unplanned expenses,” said McBride.
Bankrate’s polling showed that 44 percent of those surveyed said they could pay for a $1,000 expense through their savings, while 20 percent said they would charge it to a credit card and pay over a period of time. Ten percent of respondents said they would borrow from family or friends to pay and another 4 percent said they would take a personal loan out.
The 44 percent that indicated they could afford to pay a $1,000 expense is the highest in eight years of polling, with numbers hovering between 37 and 41 percent from 2014 to 2021.
The Bureau of Economic Analysis also found that the national personal saving rate, defined as a percentage of disposable income left after people pay taxes and engage in their typical spending habits, has been declining for four straight months. The latest rate from December 2021 sat at 6.9 percent, decreasing from October’s 7.1 percent, and decreasing nearly 3 percent since August 2021.
Age mattered little in a person’s ability to cover a surprise expense, with Bankrate’s survey revealing small percentage differences between each generation.
Within Generation Z, people between the ages of 18 to 25, 42 percent said they could pay a surprise $1,000 expense through their savings. In the older Baby Boomer generation, people between the ages of 58 to 76, 44 percent indicated the same.
However, Bankrate did find that college graduates could better withstand emergencies financially, with 59 percent of college graduates able to use savings, compared to 40 percent of those with only some college and 34 percent with no more than a high school diploma.
Inflation is a big culprit, as Bankrate found that prices are rising at the fastest pace in nearly 40 years, and many U.S. adults said that’s inhibiting them from setting money aside for savings. In Bankrate’s survey, 49 percent of adults said they were saving less due to the current state of inflation.
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