1 in 3 Americans Have More Debt Than Emergency Savings

A record-high percentage of Americans have more in credit card debt than in emergency savings and many blame inflation for their inability to save or pay for their living expenses. That’s according to Bankrate’s Annual Emergency Savings Report, an exclusive survey done by Bankrate and polling partner SSRS. 

The survey found that more than one-third (36 percent) of U.S. adults owe more in credit card debt than they currently have in their emergency savings. 

It’s the highest percentage of Americans who owe more than they have saved (tied with last year) since 2011, when Bankrate first began asking about the health of Americans’ credit card debt and emergency savings.

“At a time of record high credit card rates, we see a record high number of Americans carrying credit card debt that exceeds their emergency savings,” said Bankrate Chief Financial Analyst Greg McBride. 

Bankrate’s annual emergency savings report has annually polled 1,000+ U.S. adults about their level of debt and emergency savings. The most recent data, from January 2024, also examines whether people are prioritizing paying off debt or building emergency savings, as well as if they have more emergency savings now compared to last year, Bankrate said.

More than one in three (36 percent) U.S. adults had more credit card debt than money saved in an emergency savings account in both 2023 and 2024, Bankrate found. 

Low savings could be concerning. If they were to lose their primary source of household income tomorrow, 66 percent of U.S. adults would be worried that they wouldn’t have enough emergency savings to cover a month’s living expenses, the survey found.

However the majority (55 percent) of U.S. adults currently have more emergency savings than they owe in credit card debt. That’s up from 51 percent in 2023 and is the highest percentage since 2018, Bankrate found.  

More than 1 in 3 Americans have more credit card debt than emergency savings

Despite reporting more debt, the survey also found many Americans are also working to improve their emergency savings. 

Almost a third (30 percent) of U.S. adults have more emergency savings now than they had a year ago, the highest percentage in Bankrate’s polling since 2020.

  • Around one in four (28 percent) people are prioritizing boosting emergency savings this year, but that’s the lowest percentage yet in Bankrate’s polling.
  • Another 25 percent are paying down debt, up from 23 percent in 2023.

“Recognizing that the cost of carrying debt has increased significantly in the past two years and the insufficient level of emergency savings, more Americans are focusing on both paying down debt and boosting emergency savings simultaneously, rather than one to the exclusion of the other.” McBride says. 

Increasing savings is a key step in improving the financial health for many American consumers, as the majority (56 percent) of U.S. adults reported they wouldn’t be able to pay for an emergency expense of $1,000 or more, such as an emergency room visit or unexpected car repair, from their savings account. 

In fact, a majority reported they would borrow money in the event of an emergency:

  • 44 percent would pay an emergency expense of $1,000 or more from their savings
  • 21 percent would finance the emergency expense with a credit card
  • 10 percent would borrow from family and friends
  • 4 percent would take out a personal loan

“All too many Americans continue to walk on thin ice, financially speaking, with fewer than half indicating they would pay an emergency expense of $1,000 or more from savings,” Bankrate Senior Economic Analyst Mark Hamrick says. 

“Interest rates charged on credit card debt, recently averaging nearly 21 percent, are the highest we’ve seen. Yet 21 percent of Americans would use a credit card and pay it off over time when facing a sudden, unforeseen expense,” Hamrick says. “That risks putting them even farther behind on their financial goals.”

Average credit card rates, as of February 2024, are at a record high. If you’re carrying a credit card balance this year, you may end up paying a great deal of money in interest, according to personal finance experts. 

“Financing purchases at 20 percent interest rates is a sign of the financial strain millions of households are feeling,” McBride said.

Not having enough savings for an emergency is weighing on people’s minds. If they were to lose their primary source of income tomorrow (such as their job), 66 percent of U.S. adults would be worried about having enough emergency savings to cover their immediate living expenses for the next month. 

Tackling Burdensome Credit Card Debt

Regardless of their financial situation, more people want to tackle both debt and savings in 2024, compared to last year: 36 percent of U.S. adults are prioritizing both paying down debt and increasing emergency savings right now. 

It’s the highest percentage in seven years, and up slightly from 2023, when 34 percent of people reported they were working on paying off debt while funding their emergency savings.

One reason many say they have fallen behind when it comes to savings goals? Inflation.

The majority (63 percent) of Americans say high inflation is causing them to save less. 

Rising interest rates can make your monthly debt payments more expensive, but high interest rates aren’t always harmful. Savings accounts with higher interest rates could be beneficial, and in fact, 19 percent of people say rising interest rates are causing them to save more for unexpected expenses.

“Inflation has been a key culprit standing in the way of further progress on the savings front. Fortunately, rising interest rates have also provided more generous returns on savings,” Hamrick said.

3 tips on building your emergency fund amidst high inflation

Building an emergency fund can be a lifeline if your income decreases or you lose your source of income. Here are three tips on how to start and maintain an emergency fund to prepare for uncertainty.

1. Figure out how much you need in emergency savings

Traditional personal financial advice recommends consumers establish an emergency savings account that would be able to cover necessary living expenses such as rent, mortgage payments, car payments, groceries, utilities, gas, childcare, health insurance, and anything else that is considered a needed expense for you and your family. 

To determine the amount of money you personally need in an emergency savings account, personal finance experts recommend you add up the cost of all necessary expenses you would need to cover for a month and then multiply that by a minimum of six, representing a financial cushion for at least six months. And yes, if you have credit card debt, make sure to include payments on that debt in your list of necessary expenses.

For example, if your monthly bills total $2,000 a month, saving $6,000 will allow you to pay your bills for a short time if you lose your main source of income. However everyone’s situation is different and you may need to save more especially if you are self-employed or if you are preparing for economic hardship, such as a hiring slowdown or a recession.

Give yourself time to reach your funding goal.

“It takes time to accumulate a sufficient emergency savings cushion, in large part because household expenses tend to increase until your peak earning years, making what constitutes an adequate cushion a moving target,” McBride says.

2. Open a savings account just for emergencies

Different emergency funds allow you to protect your savings and allow you quick access when you need the money. Creating a rainy day fund or a separate savings account with your existing bank or credit union can allow you to save emergency funds for the future.

Because building savings takes time, McBride recommends people automate contributing to their savings accounts as much as possible. 

“Successful saving is all about the habit. Regular contributions such as a direct deposit from your paycheck or an automatic monthly transfer into an online savings account lead to a higher level of emergency savings and greater comfort level with it,” McBride says.

Automating your savings can be particularly helpful for those paying off credit card debt too, McBride notes.

“Having a direct deposit from your paycheck into a dedicated savings account automates the savings, allowing you to channel your take home pay toward the goal of paying down debt.”

3. Make a budget around savings

You may already have a budget in place to make room for saving more, but make sure you stick to your good habits. Rebuilding your savings, or starting to save for the first time, can be easier by automatically transferring money to your savings each month or taking on side hustles for more income.

If you’re not sure how to make room in your budget to establish an emergency savings while paying off credit card debt, consider having a complimentary budget analysis with one of DebtWave’s certified credit counselors. 

When you call DebtWave Credit Counseling, Inc. for a free credit counseling session, you’ll speak one-on-one with a certified credit counselor about your finances for about 60 minutes.

During the call, a financial counselor will pull a soft inquiry on your credit, meaning it won’t have a negative impact on your credit score, but will allow your credit counselor to view your liabilities, account statuses, and credit score. Your financial counselor will also inquire about your financial goals, income, expenses, and debts, in order to provide general personal finance advice, including advice on budgeting and managing money.

Learn more about DebtWave’s credit counseling and debt management services and schedule a complimentary budget analysis with one of our certified credit counselors here.

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