57% of Americans Cannot Make $1,000 Emergency Payments
Jose Nino
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Most Americans are not prepared to handle unexpected expenses. According to Bankrate’s latest Annual Emergency Fund Report, 68% of Americans are concerned that they wouldn’t be able to cover basic living expenses for one month in the case they lost their primary income source.
In a similar vein, 57% of United States adults cannot afford to make a $1,000 emergency expense. On a generational level, members of Gen Z (85%) and millennials (79%) are more likely to be concerned with making emergency expenses.
Americans are largely saving less due to inflation. 74% of respondents indicated that inflation was preventing them from saving. Rising interest rates have also impacted savings, with 68% of respondents citing these as the primary factor that has prevented them from saving. According to Ivan Pino of Fortune.com:
While the Federal Funds rate doesn’t directly impact consumers, it does eventually trickle down to consumers by influencing interest rates on consumer products like credit cards, mortgages, home equity loans, and student loans, as well as yields on savings products like high-yield savings accounts, certificate of deposits (CD), and more.
On top of that, 40% of respondents alluded to changes in employment or income as a reason to not save as much.
To cover emergency costs, increasing numbers of Americans are relying on credit cards. The report revealed that 25% of individuals would incur credit card debt to cover a $1,000 emergency expense and pay it off over time. Generally speaking, payment history and credit card debt are the two most important factors that go towards calculating an individual’s credit score.
When credit card interest rates are at record highs, carrying a balance on a month-to-month basis will negatively impact an individual’s credit score if they can’t make their payments.
America’s precarious economic state is not a coincidence. It’s the result of a combination of easy money policies (which generate inflation), a bloated regulatory state that drives costs up, increasing taxation, and a general culture that promotes financial profligacy. The US needs to get its financial house in order at the both governmental and individual levels.
No easy task to say the least.
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