About 28 percent of adults in the United States have no emergency savings, according to a new study from Bankrate.com.
Bankrate’s latest Financial Security Index reports that only one in four Americans have a rainy-day fund, but not enough money to cover three months’ worth of living expenses. Just 18 percent of Americans say they could live off their savings for at least six months. That’s the lowest percentage reported in nine years of Bankrate’s poll.
Getting into the habit of saving money is critical to building a nest egg, the experts say. Contributions to 401Ks or high-yield savings accounts can help families save for the future.
“Household expenses have gone up and, in many cases, incomes haven’t kept pace,” says Greg McBride, Bankrate’s chief financial analyst. “So, if you haven’t been saving, that and the regularity of unplanned expenses can easily chip away at what once was an adequate savings cushion.”
Another Bankrate study reports that a growing number of workers rely on multiple sources of income, which can make it difficult to save based on the irregularity of freelance or project work.
“If the demands aren’t really there, that really shifts a bunch of risk to the employee,” says John Thompson, chief program officer at the Financial Health Network. He notes many such workers aren’t sure when they’ll be working, or how many hours a project will require.
He adds there is an income instability and predictability issue that’s present among different kinds of households and workers, not just tech workers in the gig economy.
How much we should save for emergencies
Though few respondents in the survey have six months’ worth of emergency savings, more than half (52 percent) say they need that much money readily available to feel comfortable about their financial situation. One in five say they would be comfortable with just three to five months’ worth of savings for a rainy day.
How much you should save to be prepared for the unexpected varies depending on your personal circumstances and the kind of job you have. Sole breadwinners or those who are in business for themselves should build a savings account without enough money to cover expenses for as many has 12 months.
“There are instances where even a six-month cushion is probably not enough, particularly those that are sole breadwinners or in business for themselves and those that have variable or unpredictable income,” McBride says.
America Saves, Georgia Saves
America Saves is a campaign managed by the non-profit Consumer Federation of America, which “motivates, encourages, and supports low- to moderate-income households to save money, reduce debt, and build wealth.”
Its state chapters include “Georgia Saves,” which encourages families and individuals to “start small and think big,” by tracking their spending and “taking control of their financial future.” Its staff of trained volunteers encourages families to set financial goals and develop a savings strategy. And the UGA Office of Extension promotes the Georgia Saves Campaign to middle and grade school students.
