Recent signs of an economy on the upswing has consumers more willing to spend than to save money. Even with economic indicators like rising wages and falling unemployment, almost a quarter of Americans said they still have no emergency savings, according to an annual Bankrate.com report released Wednesday.
The study found that people were more likely to at least have some amount of money available in a bank account in a sign that people who were really struggling are doing at least a little better. The amount of people with no money readily available in either a checking, savings or money market account fell to a seven-year low of 23 percent, a decline from 24 percent last year, the study found. The poll was conducted in June by research firm SSRS, using a national sample of 1,006 people.
“People are not making headway in savings, largely in part because they don’t prioritize saving,” said Greg McBride, chief financial analyst at Bankrate.com.
The percentage of Americans who at least have some savings but not enough to cover three months’ worth of expenses increased by 2 percent from last year’s 20 percent, the report said. The percentage of people who could cover expenses for three to five months increased to 18 percent, from 17 percent last year. There are still only 29 percent of Americans who have enough emergency savings to cover at least six months’ of expenses, down from 31 percent in 2017. Financial advice dictates that people have at least enough savings to cover six months of expenses.
“Despite the enormous wealth gains we have seen in the stock market and in the housing market, that wealth is very unevenly distributed,” said Torsten Slok, chief international economist at Deutsche Bank AG in New York. He said that the disparity is overriding any gains made in the job sector.
The median family simply has fewer resources, Slok said, citing a 2017 report he authored on U.S. income and wealth inequality. About a third of American families have no wealth or negative wealth, not counting the value of their home. “It’s obviously not good from a vulnerability perspective,” he said.
Despite the lack of people who have an adequate amount of savings stored, most Americans don’t seem to be worried about their financial situation. Sixty-two percent say they are somewhat or very comfortable with their emergency savings. About one in five Americans with no emergency savings at all said they felt comfortable as well.
McBride finds the thinking illogical. “In some cases, it’s just denial,” he said. He continued that “they’ve never been out of work, had a big medical expense or experienced a significant event that threatened their emergency savings.”
Lower-income households are more likely to have no emergency savings, but 27 percent of the lowest-income households have accumulated enough savings to cover at least three months’ expenses, suggesting that savings is not a function of income, Bloomberg reports. About a quarter of the highest-income households either have no emergency savings or just enough to cover fewer than three months’ expenses.
The Northeast has the highest percentage of Americans who claim to have enough saved to cover six months of bills. The South has the lowest percentage.
By: Katt Deibart