A recent study by Bankrate.com found that most Americans don’t have enough savings in case of an emergency. And while this of course speaks to the fact household expenses have increased while incomes have stayed the same, the truth is that those without savings could end up in tough financial situations if faced with an emergency and unexpected bills. This in turn could lead to many having to file for bankruptcy.
Financial experts say that, ideally, a person should have enough money set aside in an emergency fund to pay for at least six months’ worth of living expenses. However, only one-quarter of Americans have that much saved, and one-quarter only have enough savings for three months of expenses. Another 28 percent don’t have any money at all set aside for emergencies.
In the current economic climate, one could argue that it would make sense why most Americans don’t have the suggested amount in savings. But, the truth is that people are saving more now than they did in 2006. Instead, what the real problem seems to be is that people are just not in the habit of saving.
To help deal with unplanned expenses — like car problems or a medical issue — experts recommend using direct deposit to funnel some money in from a paycheck or checking account into a savings account. This way, if there is an emergency or a sudden layoff, there should ideally be money in that account that a person can use instead of relying on credit cards and falling deeper into debt.
Source: CNN Money, “28% of Americans have no emergency savings,” Blake Ellis, June 25, 2012