At the end of every year, it seems, Bankrate.com conducts a survey on how much money Americans have saved in case of emergencies, and this year the numbers are not good. As of late 2016, more than four Americans in ten did not have enough money saved for an emergency costing at most $1,000. The figure is up about four percent from last year, but that may be within the study’s margin of error. The finding is quite discouraging, but here’s what else the report found.
About three in five Americans faced a major unexpected expense in 2016, with cars, appliances, and illnesses taking the most prominent slots. However, it’s unclear because the article also says that 45 percent of Americans said that they or their immediate family members suffered such an emergency expense.
How Americans would deal with such expenses is another matter. Aside from the 41 percent who could cover the expense with savings, another 20 percent would rely on a credit card, and 20 percent more would simply cut their spending on other items. Finally, 11 percent claimed they would turn to friends or family for assistance.
Among the items that people would cut, out-of-the-house coffee and alcohol purchases featured most prominently, 44 percent and 37 percent, respectively. Generally, younger Americans were more willing to cut these purchases, with 51 percent of millennials (undefined here) claiming they would cut alcohol and 46 percent saying they would do so for coffee as well.
Expectedly, income plays a prominent role in Americans’ ability to pay for emergencies. The higher a household’s income, the more likely it can pay its large, unexpected bills with saved money. Age also affects payment methods, with the silent generation (71 and older) being more likely to use credit cards and millennials more likely relying on savings.
Ultimately, it’s not clear whether the report distinguishes between Americans who would struggle to pay their credit card bills or use their credit cards for large purchases yet repay the balances out of savings before interest accumulates. If so it would imply that more Americans have savings than the report suggests.
The Bankrate.com report is here.
Building a cash cushion is an important first step to saving money precisely because it can absorb unexpected expenses without creating the need to take on more debt. However, if large expenses have contributed to debts that you cannot repay, then consulting with an experienced New York bankruptcy lawyer can help you assess your options.
For answers to more questions about bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced Brooklyn bankruptcy attorney Bruce Weiner for a free initial consultation.