Many financial advisers recommend carrying 3-6 months’ worth of expenses in an emergency fund, but only 39 percent of Americans would be able to cover an unexpected $1,000 outlay with their short-term savings, according to a recent Bankrate survey. Another new poll conducted by Bankrate similarly found that only around half (58 percent) of consumers currently have more emergency savings than what they owe in credit card debt. At the same time, 12 percent of respondents reported having no credit card debt but no savings either.
That agrees with an earlier study by Bank of America Merrill Lynch, which asked U.S. adults to list their biggest barriers to retirement saving and found that one of most frequent responses was “I prioritize(d) paying down debt.” As for generational differences, Millennials in the Bankrate survey as expected are more likely to have greater credit card debt than savings, but these young adults also appear determined to improve their financial standing. In fact, 61 percent of Gen-Y respondents said that boosting their emergency fund is a top financial priority, including 63 percent of younger Millennials (18-27).
Such statistics are encouraging because the earlier a person can learn the importance of setting money aside for the future the better. Further, having an adequate emergency fund helps decrease the likelihood of being forced to dip into one’s retirement savings early. That is especially important since many Americans are at risk of retiring broke, according to a new report from GoBankingRates. Specifically, 42 percent of surveyed U.S. adults said that they currently have less than $10,000 set aside for retirement, including 14 percent of respondents with absolutely no long-term savings.
On the bright side, those figures are marked improvements from prior surveys, and the percentage of Americans with large savings account balances has grown. Moreover, 57 percent of surveyed Millennials said that they have less than $10,000 in retirement savings, down from 71 percent in 2017, and the percentage of Gen-Y respondents with $300,000 or more set aside has increased from 5 percent to 9 percent. For those whose savings are still lacking, the report’s authors suggest reviewing your spending to see what nonessential expenses can be cut and increasing 401(k) contributions with each pay raise.
Sources: Bankrate, BofAML, GoBankingRatesPost author: Charles Couch