Without the Financial Security of Stimulus Checks, Americans Can’t Afford an Emergency
Two years after Americans were forced into lockdown because of the COVID-19 pandemic, a new survey of 1,600 working adults found that 30% of people have no emergency savings set aside for unexpected expenses. That number would likely be higher if the 40% of the population that isn’t currently employed were included.
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The survey, which was conducted by The Bipartisan Policy Center, along with the Funding Our Future coalition and Morning Consult, showed that amongst those with household income under $50,000, 45% have no emergency savings. That number drops to 26% for those with household income between $50,000 and $100,000. In contrast, in October 2021, Americans had saved about 36% of their stimulus money.
Surprisingly, 12% of those with income greater than $100,000 aren’t saving for an emergency either, showing that financial insecurity occurs even amongst middle-income working adults. However, some of those who responded “no” to having emergency savings in a checking or savings account also indicated they had money in a retirement account that they could access in the event of an emergency.
About one-third of working adults said they feel “somewhat” or “very” uncomfortable about their ability to pay a $400 emergency expense without using a credit card or dipping into their retirement account, while 8% said they couldn’t afford the cost.
Digging deeper, the survey discovered that 22% of Americans who have emergency savings have less than $250 in their checking or savings account. Optimistically, 35% of working Americans have $1,500 or more saved. However, that may not be enough to pay for household expenses. Thirty percent said they could cover a month or less of expenses if they lost their job, while just 15% said they could cover a year or longer.
Another significant finding was that 42% of working Americans feel “somewhat” or “very” financially insecure. And it’s not just that they aren’t prepared for an emergency. The survey showed that 39% of working adults have struggled to cover personal expenses such as housing, utility bills, and groceries in the past 12 months. As a result, 14% of those surveyed said they borrowed money against their retirement account or withdrew funds from retirement savings to cover those costs.
With rising interest rates and a falling stock market, borrowing against retirement could leave people short on funds as retirement approaches. Similarly, using credit cards to pay for emergencies could leave them with more bills you can’t afford to pay.
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To combat financial insecurity, the BPC survey presented the idea of employer-sponsored emergency savings accounts, with money pulled directly from employees’ paychecks. This possible solution was popular with working Americans with 61% saying they would contribute to this kind of savings account along with their 401(k) or other workplace retirement account.
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