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Saturday, July 13, 2024

Over 1 in 5 Americans have no emergency savings

37% can’t afford an unexpected expense over $400, according to new Empower research

Key takeaways

  • Nearly 2 in 5 (37%) Americans say they couldn’t afford an emergency expense over $400
  • The median emergency savings for Americans is $600
  • 21% of people have no emergency savings at all
  • More than 3 in 5 (62%) Americans say that having dedicated emergency savings is a priority for them; yet 57% say high inflation and price increases have held them back from contributing this year
  • 1 in 4 (25%) people dipped into emergency savings to cover basic living expenses in the past year
  • Paying down debt is a higher priority than saving for an emergency for 57% of Americans
  • 34% believe they could handle any emergency expenses in the coming year

Are Americans prepared for a financial emergency?

Many, it turns out, are not. A new Empower study reveals more than 1 in 5 (21%) Americans have no emergency savings — money set aside for unexpected financial events such as job loss, home and car repairs, and medical bills. Nearly 2 in 5 (37%) couldn’t afford an emergency expense over $400.

Conventional wisdom tells us to plan for the unplanned by socking away enough to cover 3 – 6 months of expenses. Yet Americans have accumulated a median emergency savings of just $600. Baby Boomers and Gen Xers have put aside the most for the unforeseen with median savings of $1,000 and $868, respectively, and Millennials and Gen Zers the least with median savings of $500 and $200, respectively. The median savings for men sits at $1,000 — twice as much as the median savings for women.

What’s getting in the way?

Though more than 3 in 5 (62%) Americans say having a dedicated emergency savings is a priority, close to half (47%) say regular monthly expenses are too high for them to put money away.

Economic challenges are impacting Americans’ ability to prepare, too: Nearly 6 in 10 (57%) say high inflation and price increases have held them back from contributing to their emergency savings this year. Almost a third (30%) have depleted their emergency savings and have been unable to catch up or replenish it, while 2 in 5 (40%) have not contributed to their emergency savings in more than a year.

High credit card balances could also be putting the squeeze on emergency savings practices. Almost 3 in 5 (57%) Americans prioritize paying down debt over building up an emergency fund.

Are Americans losing sleep over saving up?

More than half (54%) feel stressed that they don’t have enough saved for an emergency. Relationship status seems to be a factor in how secure people feel, too, with more single adults (58%) expressing anxiety about not having a big enough emergency nest egg than those who are married (46%).  

Just as many people (54%) say they worry about paying emergency expenses if or when the time comes — and 60% of Millennials, 58% of Gen Xers, and 57% of Gen Zers feel that way.

When asked how they’d cover an unexpected expense in the year ahead given their financial situation, roughly a third of Americans (34%) say they could handle it while 15% are unsure.

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Is there a secret to saving success?

Despite obstacles, many Americans are still striving to widen their emergency safety net: 43% contributed to emergency savings in the past year and 42% did so within the last 6 months. In the past year, more Baby Boomers (51%) and Gen Xers (44%) were able to tuck away emergency savings than Millennials (39%) or Gen Zers (40%).

Among the savers, roughly one third (32%) subsidize their emergency savings sporadically when they have extra disposable income, while 14% contribute on a regular basis, 14% incorporate emergency savings into their monthly budget, and 11% automate monthly contributions.

Asking for advice is helping some Americans stay on track, too. One in 5 (20%) worked with a financial advisor to set emergency savings goals and establish a plan. Seeking guidance is more typical among Millennials (32%) and Gen Zers (31%) and least prevalent among Baby Boomers (9%) and Gen Xers (11%).

Why dip into the emergency pot?

In the past year, more than one third (35%) of Americans were able to steer clear of unexpected financial situations, but others tapped emergency savings to take care of day-to-day outlays, with 1 in 4 (25%) dipping into emergency savings to afford basic living expenses.

Here’s a look at some of the emergency expenses Americans encountered in the past year.

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In case of emergency…break out the cash

Liquidity is critical when it comes to tackling surprise expenses, and nearly one-third of U.S. adults (30%) stash emergency savings in cash. Emergency cash is king for even more Millennials (35%) and Gen Xers (33%).

Additionally, 33% are looking to grow emergency money in a high-yield savings account. While it’s the savings vehicle of choice for 43% of Millennials and 39% of Gen Zers, only about a quarter (26%) of Baby Boomers and Gen Xers choose this option.

About the study

The Empower “Emergency Savings” study is based on online survey responses from 1,192 Americans ages 18+ fielded by YouGov from April 12 – 15, 2024. The survey is weighted to be nationally representative of US adults (aged 18+).

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The Currency editors

Staff contributors

The CurrencyTM, a publication from Empower, covers the latest financial news and views shaping how we live, work, and play. We keep you current on ways to plan, save, and invest for life.

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