"People who are less comfortable with their savings now versus a year ago outnumber people who are more comfortable by a margin of nearly two-to-one."
Three-fourths of Americans (76 percent) do not have enough savings to cover at least six months of expenses, a new Bankrate.com survey finds. Half of Americans do not have a rainy day fund that would sustain even less than three months expenses, while more than one-fourth (27 percent) have no emergency savings whatsoever. These numbers are consistent over the past three years, Bankrate reported.
The devastation wreaked by the 2008 economic collapse was a wake-up call to Americans about the importance of establishing a rainy day fund for emergencies. In the pre-recession days of 2006, only 39 percent of Americans had at least three months expenses set aside, Bankrate.com stated. But savings remains the weakest component in the company’s monthly Financial Security Index, noted Greg McBride, CFA and Bankrate.com’s senior financial analyst, in a statement.
“People who are less comfortable with their savings now versus a year ago outnumber people who are more comfortable by a margin of nearly two-to-one,” he said. “That’s especially jarring since people are feeling much more optimistic about other aspects of their finances.”
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These findings echo a Corporation for Economic Development survey from earlier this year that found nearly half of American households (43.9 percent) are lacking a rainy day fund. The equivalent of 132 million people are considered “liquid asset poor,” meaning they lack the savings to cover basic expenses for three months if a family member lost their job or suffered a medical emergency or other crisis that would lead to a loss of steady income, that report said.
Yet another study earlier this year conducted by HelloWallet found more than one-fourth of U.S 401(k) participants are dipping into their retirement savings for non-retirement needs. Three-quarters of retirement plan participants surveyed reported cashing out their entire plan balance because they face money management challenges. More than half (53 percent) reported using their cashouts to pay bills, loans and other debts. Twelve percent said they used the money toward housing, while 11 percent use the breached income for general expenses. Less than 8 percent said they took early distributions because they were laid off from their jobs.
“Saving more” was second only to “spending less” on the list of affluent investors’ financial resolutions, according to Spectrem’s Millionaire Corner research earlier this year. Yet, tellingly, few investors surveyed resolved to establish a household budget, a financial planning tool that increases their chances of success.
Donald Liebenson writes news and features for Millionaire Corner. He has been published in the Chicago Tribune, The Chicago Sun-Times, The Los Angeles Times, Fiscal Times, Entertainment Weekly, Huffington Post, and other outlets. He has also served as a marketing writer for Chicago-based Questar Entertainment and distributor Baker & Taylor.
A graduate of the University of Southern California, he is married with a college-age son. He also writes extensively about entertainment.