Americans are comfortably numb with their savings plight. Experts recommend households hold six months’ worth of emergency expenses in a savings account as a buffer against spiraling into debt should disaster occur. Just 29% of adults say they have that large a reserve, according to a new Bankrate survey.
You would think that Americans with insufficient savings would be wracked with angst and determined to beef up their funds. A majority of respondents – 62% – say they are either very or somewhat comfortable with their level of emergency savings, according to the survey. This means many families are living on the edge, yet not resolute to do anything about it.
“The goal should be to have enough emergency savings to cover six months’ expenses – and anything less than that should cause discomfort,” says Greg McBride, CFA, Bankrate chief financial analyst.
A quarter of Americans (24%) say they are very comfortable with what they’ve put away, and 37% are somewhat so (the two groups combine to 62% due to rounding). Another 1-in-7 say they aren’t too comfortable, while 22% are not comfortable at all.
A separate Bankrate survey recently found that just 39% of Americans would pay for a $1,000 unexpected expense (like a health scare) from savings. One problem may be that Americans simply don’t quite know how much they need to save. Six months’ worth of emergency expenses can feel like a vague target, especially if you’re not up to speed on your budget.
Bankrate issued a report in May on the hardest and easiest cities to build a six-month emergency fund. The median amount needed, for a family of four, was roughly $19,500. Only the top 80% of earners have that much saved, according to the Federal Reserve. Median income households, meanwhile, have about a fifth of that in savings, according to the Fed, the same inflation-adjusted amount as they did 15 years earlier.
Younger workers are the most susceptible to a lack of savings. A quarter of both millennials (age 18 to 37) and Gen Xers (38 to 53) have no savings, while roughly another quarter of both generations carry less than three months’ worth. More than a third of boomers (36%) and 42% of the Silent Generation have met the milestone. This is a precarious position for workers who are building a career, starting families and buying homes. Millennials, after all, represent the largest homebuying population in the nation.