The findings, based on survey results from 1,015 adults, also revealed that 37% of Americans would borrow money if they were faced with an unexpected expense. In addition, 28% of respondents said they or a close relative had to pay for a big, unexpected expense in the last year. The average cost of that expense was $3,518.
Fifty-nine percent of households that earn $75,000 or more annually said they would use savings to pay for unanticipated bills. In addition, the survey found that 45% of men said they would use their savings to cover unexpected expenses, compared to 38% of women. Meanwhile, 36% of millennials would turn to their savings in the event of a $1,000 emergency, compared to 41% to 44% of non-millennial adults.
For about 16% of Americans surveyed, using a credit card was the preferred method to deal with emergency costs.
“But this comes at a high cost, as the average $3,500 expense financed at the national average credit card rate of 17% would require monthly payments of $125, taking three years to pay off and incurring nearly $1,000 in finance charges,” Greg McBride, Bankrate’s chief financial analyst, is quoted as saying in a January 22 press release. “Whatever savings you can accumulate acts as a buffer from high-cost debt when unplanned expenses arise.”
Even though the US economy has improved in recent years, many Americans haven’t made headway in saving money.
“High household expenses and stagnant income can put limits on how much you can save,” McBride is quoted as saying. “But the main reason is that saving just isn’t a high enough priority that households will cut back on spending or automate the savings in order to make it happen. The first step is the most important.”
This isn’t the first study pointing to Americans’ lack of savings.
The US Federal Reserve’s 2018 report on the economic well-being of American households, released in May 2019, found that 40% of US adults would not be able to pay for a $400 emergency with cash, savings or a credit card charge that they could pay off quickly.