Two years after Americans were placed on lockdown due to the COVID-19 epidemic, a study of 1,600 working people discovered that 30% have no emergency funds set aside for unforeseen expenses. The figure would almost certainly be higher if 40 percent of the currently unemployed population were included.
According to a poll conducted by The Bipartisan Policy Center, the Funding Our Future alliance, and Morning Consult, 45 percent of people with a family income of less than $50,000 have no emergency savings. Individuals with a household income of $50,000 to $100,000 have a lower percentage of 26 percent. Americans, on the other hand, had saved roughly 36% of their stimulus money by October 2021.
Surprisingly, 12 percent of people earning $100,000 or more do not save for an emergency, indicating that financial insecurity affects even middle-income working adults. Some respondents who stated that they did not have emergency funds in a checking or savings account also stated that they had funds in a retirement account that they could access in an emergency.
A third of working adults are “very” or “extremely” concerned about their ability to cover a $400 emergency charge without resorting to a credit card or raiding their retirement account. At the same time, 8% say they cannot afford it.
Further investigation revealed that 22 percent of Americans with emergency funds have less than $250 in their bank or savings account, according to the report. According to optimistic estimates, 35% of working Americans had $1,500 or more in savings. However, this may not be enough to cover living expenses. Thirty percent said they could cover their expenses for a month or less if they lost their job, while only 15% said they could do so for a year or more.
Another significant finding was that 42% of working Americans are financially insecure, either “somewhat” or “extremely.” Not only are they unprepared for a disaster. According to the survey, 39 percent of working people had difficulty covering personal expenses such as housing, utility bills, and groceries in the previous year. As a result, 14% of those polled said they borrowed money from their retirement account or depleted their retirement savings to cover the expenses.
Borrowing against retirement may leave people with insufficient funds as retirement approaches, especially with rising interest rates and a collapsing stock market. Similarly, using credit cards to cover unexpected expenses may leave them with even more debt.
To address financial insecurity, the BPC survey proposed the idea of employer-sponsored emergency savings accounts, with funds deducted directly from employees’ paychecks. Working Americans were enthusiastic about this potential solution, with 61% saying they would contribute to it in addition to their 401(k) or other employer-sponsored retirement account.