The recent financial crisis generally led many Americans to pay down their debt and spend more wisely, but today nearly one in four have no emergency savings should the market – or they themselves – face financial hardship, new research shows.
According to Bankrate.com’s monthly financial index report for June, 26 percent of Americans lack any savings in case of emergency. Moreover, 67 percent did not have the recommended six months worth of expenses covered, and only half saved enough to cover expenses for three months. The percentage of Americans with at least three months’ expenses in savings declined from 45 percent last year to just 40 percent this year.
For Bankrate.com’s June index, Princeton Survey Research Associates International interviewed 1,004 adults by phone between June 5 and 8.
Respondents, however, acknowledged their lack of preparedness for a financial hardship, as 34 percent felt less comfortable about how much they had saved compared with a year earlier, while 18 percent felt more comfortable and 46 percent felt the same.
“Americans continue to show a stunning lack of progress in accumulating sufficient emergency savings,” Greg McBride, Bankrate.com chief financial analyst, said in a statement. “Even among the highest-income households – those with annual income of $75,000 or above – fewer than half (46%) currently have a six-month savings cushion.”
Respondents identifying themselves as black were nearly twice as likely (40 percent) to say they had no emergency savings as those identifying as white (21 percent), the research found. Moreover, retirees were more than twice as likely (36 percent) to have saved at least six months’ of expenses as were those ages 18 to 29 (16 percent), and 36 percent of respondents with a high school education or less said they had no emergency savings, compared with 10 percent of college grads.
Individuals ages 30 to 49 were more likely than any other age group to have no emergency savings. However, respondents ages 18 to 30 are the most likely to have up to five months’ expenses saved up.
“Many of those under age 30 have the benefit of lower expenses due to roommates, living with their parents or being students,” McBride said in explaining the discrepancy. “Ages 30 through 49 are high-spending years, when expenses often rise faster than emergency savings can keep up.”
Despite the lack of attention to preparing for future financial crises, Americans generally are more upbeat about their financial security. Bankrate.com Financial Security Index rebounded to 101.5, up from 98.7 in May and 100.5 in April.
Job security bounced back from a negative reading in May, the company said. Currently, 24% of Americans feel more secure in their jobs than they did 12 months ago versus 17% who feel less secure. May’s bout of employment insecurity represented as an anomaly amid upbeat attitudes on job security in six of the past seven months, Bankrate.com said.
Americans’ comfort level with debt also recovered after two months of discomfort. Twenty-three percent are more comfortable than they were in June 2013, and 20% are less comfortable. Fifty-five percent said they felt the same.
Among the Financial Security Index’s other three components, net worth and overall financial situation are areas of strength, particularly as the stock market continues setting new record highs. Savings remains a weak spot and has been in negative territory every month since polling began in December 2010, according to Bankrate.com.