Americans are better placed with their emergency savings now than they were a year ago, but they are feeling uneasy.
More than half of Americans feel very uncomfortable or uncomfortable with the amount of emergency savings that they have, according to a Bankrate survey released Thursday and conducted in early June, up 10 percentage points from last year.
Some 23% of households in the survey said they had no emergency savings, down 2 percentage points from 25% last year. Greg McBride, chief financial analyst at Bankrate, said that this is among the lowest level seen in 12 years of polling.
A recent report by the Federal Reserve Board found that 68% of U.S. adults said last year they would be able to cover a $400 emergency with cash, savings, or a credit card that they could pay off when the next bill is due, a nine-year high. That was up from 63% in 2019, before the COVID-19 epidemic began.
Americans are better positioned with their emergency savings now than they were a year ago, McBride said, but inflation is at a four-decade high and eroding the comfort level as well as the buying power of savings people have set aside. The cost of living went up by 1% in May due to higher rents, gas and food prices, a 40-year high of 8.6% and making it harder for Americans to afford everyday items.
Many Americans have reported that they have already dipped into their savings to cover rising prices. The Bureau of Economic Analysis said Americans had a savings rate of 4.4% in April, down from 6% at the beginning of the year. The savings rate has a percentage of disposable income that is used to calculate personal savings. According to the BEA, it is the percentage of people's incomes left after they pay taxes and spend money.
McBride said that successful saving is best achieved by setting up a direct deposit every month into a savings account. The savings happen first before you think about it, McBride said. If you wait until the end of the month to save what is left over, very often nothing is left over.