Many financial advisers recommend carrying 3-6 months’ worth of expenses in an emergency fund, but only 41 percent of Americans would be able to cover an unexpected $1,000 outlay with their short-term savings, according to a Bankrate survey we looked at last month. Another new poll conducted by Bankrate similarly found that not even half (49 percent) of consumers currently have more emergency savings than what they owe in credit card debt. At the same time, 16 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 the most frequent responses was “I prioritize paying down debt.” Older millennials (ages 31-39) in the Bankrate survey shared this sentiment, but every other age group appeared to be focused more on prioritizing saving this year. This is encouraging because the earlier a person can learn the importance of setting money aside for the future the better. In fact, the Bankrate researchers suggested that younger adults have time on their side because “every $1 they invest could grow to $15 or even $20 by the time they retire, thanks to compound interest.” 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 already at risk of retiring broke, according to an updated analysis by GoBankingRates. Specifically, 64 percent of surveyed U.S. adults said they currently have less than $10,000 set aside for retirement, including 46 percent who reported having absolutely no long-term savings. Younger Americans are of course exacerbating those figures, as 54 percent of Millennials and 63 percent of Gen-Z respondents said that they currently have no money set aside for retirement. However, an alarming 39 percent of respondents ages 55-64 stated that they still have yet to amass any sort of old-age nest egg. For those whose savings are lacking, the report’s authors recommend reviewing your spending to see what nonessential expenses can be cut and increasing 401(k) contributions with each pay raise.
Sources: Bankrate, BofAML, GBR
Post author: Charles Couch