GOBankingRates previously detailed how significantly Americans’ savings accounts had depleted in the past year due to ongoing inflation and as stimulus payments, expanded child tax credits and unemployment surpluses expired. While U.S. households were able to hold on to $2.3 billion in savings during the pandemic, more than a quarter of that has since been wiped out, according to the Federal Reserve.
That statistic is concerning to financial experts like Suze Orman, who spoke to CNBC’s “Fast Money” on how Americans are “dangerously unprepared for a financial shock” with little to no money in an emergency savings fund. CNBC reported on new survey findings which suggest that 67% of Americans would not be able to cover a $400 emergency expense. That could be a real problem for an already shaky economy.
“If people don’t have the money to buy things, eventually that’s going to affect everybody,” Orman said, adding, “Most of America today has absolutely no money.”
Orman added that it’s a huge swing from a couple of years ago when the pandemic led, through various circumstances, to healthy savings. Americans were not only offered stimulus, but with nowhere to spend money — as dining and entertainment options were limited or nonexistent — consumers were able to stockpile their earnings.
Now, Orman said, a year or two later, “Interest rates are through the roof, [there’s] rent they can’t afford, they can’t buy a house, they can’t buy a car, they’re living paycheck to paycheck.” In fact, 74% of the people her team polled said they are waiting on the next pay period to get by… and in the meantime, people are using the money they had in their savings (if they haven’t already turned to credit cards to make ends meet). Those are all big red flags for a big financial collapse, per Orman, who also worried that personal debt default will soon happen en masse, noting that the country is experiencing historically high rates of auto repossession currently.
However, Orman also shared some tips for what she’s personally doing with her money in order to build on her savings — tips which might prove useful more broadly. Even if you only have a little to save, these ideas could still help your reserves grow.
Divert to cash, Treasury bills: Orman said she recently moved all of her money out of tech investment and other stocks and moved over to “cash,” suggesting that 80% of her money is now in 3- to 6-month Treasury bills. “I’ve kept it very short-term just in case interest rates go up, I can roll up,” she added. Orman advised that, if you follow this plan, it’s best to not go further out than six months — and to not go past June or July of this year — in order to see the fallout from the debt ceiling crisis resolve.
If you are going to invest, go for energy stocks: This is an investment Orman really believes in. “I still believe energy is viable, with great dividends,” she told CNBC. She also added she’s being very conservative in her advice for investing right now, again suggest Treasury bills as the way to go until things stabilize.
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