The United State’s economy might be growing stronger, but most of its residents are only $500 away from being flat broke.
A survey released recently by personal finance website Bankrate found 63 percent of Americans have no emergency savings whatsoever. In fact, only 37 percent of the population is financially prepared to handle an emergency, whether it is an accident, illness or a mere car repair.
“Without emergency savings, you may not have money to cover needed home repairs,” said Signe-Mary McKernan, an economist at the Urban Institute. “Similarly, without emergency savings, people could raid their retirement account.”
Bankrate surveyed 1,000 people and asked how they would acquire funds in the case of an unexpected health crisis or a car breakdown. Of all the respondents, 23 percent said they would reduce their expenses while 15 percent said they would borrow from friends and family. The same percentage would also turn to credit cards to take care of their economical woes.
“The stresses created by the economic crisis, recession and subpar recovery remain for most Americans,” explained Mark Hamrick, Bankrate’s senior economic analyst, noting that many Americans still have sizable debt to pay down. “Could more Americans double-down on belt-tightening in order to save more? Perhaps some, but this is a bigger, more complicated challenge than that.”
The Pew Charitable Trusts found in a study that about six out of 10 American households experienced a financial shock in 2015, with unexpected medical bills, car repairs and lost income being the most common factors.
It means while the economy is getting better and unemployment rate has begun to decline, the increasing costs of everything from food to basic health care has left many families struggling to put money aside for rainy days.
Moreover, Bankrate’s report echoes a similar survey by the U.S. Federal Reserve, that found savings actually depleted for many households after the recession. About 57 percent of those who had some savings prior to 2008 used some or all of it over the past couple of years.
“Why aren’t people saving?” asked Andrew Meadows, a San Francisco-based documentary-maker. “Millions of Americans are struggling with student loans, medical bills and other debts.”
However, as daunting as the entire situation seems to be, there is a positive note to it too.
Apparently, the millennials interviewed during the survey said they were more likely to use savings instead of cutting basic expenses — a refreshing change of attitude from 2014.
Putting money into a saving account while juggling bills and paying rent is certainly not an easy feat, but it is not entirely impossible either. Most financial experts advise people to separate a small amount of money each month and put it away to be used in an emergency. However, if someone wants to cut back on extra expenses, they could avoid restaurant dining and perhaps replace their daily cup of Starbucks coffee with a homemade brew.