One in four Americans has zero emergency savings: study

The economic collapse pretty much wiped out retirement accounts, investment vehicles and savings accounts. When households accumulated too much, consumed too much stuff and lost their jobs and homes, millions of Americans had nothing to rely on except for more credit and perhaps even bankruptcies.

Since then, households are starting to improve their personal financial situation. However, one area that has yet to be improved upon is emergency savings, a rainy day fund that can be used for unforeseen events, job losses and medical emergencies.

A new survey from Bankrate.com discovered that more than one-quarter (26 percent) of Americans have zero emergency savings. Furthermore, 67 percent have less than the suggested six months’ worth of savings and 50 percent have saved less than three months’ in expenses.

Respondents also noted that they were more confident in their debt levels than in previous times. Nearly one-third (30 percent) of respondents who earned at least $75,000 per year were more comfortable in their debt now than a year ago, compared to 17 percent who earn less than $30,000 a year.

The national savings rate has been an important issue for quite some time, even prior to the recession because the figure barely reached double digits when the economy was high from cheap money and easy credit. However, this can be attributed to the Federal Reserve’s monetary policy of artificially low interest rates.

Financial experts also cite low wage growth, household expenses and student loan debt are other important factors. Of course, the consumers’ appetite for buying stuff they don’t need, such as lattes, iPads and expensive cable television subscription packages, can be considerable elements.

“Americans continue to show a stunning lack of process in accumulating sufficient emergency savings. Even among the highest-income households—those with annual income of $75,000 or above—fewer than half [46 percent] currently have a six-month savings cushion,” said said Greg McBride, Bankrate.com’s chief financial analyst, in a statement. “Many of those under age 30 have the benefit of lower expenses due to roommates, living with their parents or being students. Ages 30 through 49 are high-spending years when expenses often rise faster than emergency savings can keep up.”

Industry professionals often recommend to consumers that they should maintain at least six months worth of expenses in the event of a job loss, medical emergency or some other unforeseen event that could hinder a household’s income level.

“If you don’t have emergency savings, what do you do when you have an unplanned expense or the money runs out before the bills do?” McBride added. “You’re stuck. That means for some people (turning to) high-cost borrowing, check cashing, a payday lender.”

Here are some simple steps to take to start building your savings:

–          Cut back on expenses (trips to a restaurant, smartphone data packages, gym membership)

–          Establish a monthly personal budget to track your spending and income

–          Launch an automatic savings plan and start off with $25 per month and then increase it each month

–          Pay down your debt by selling stuff you don’t use, obtaining a second job or asking for a raise

–          Start a 52-week plan: save $1 the first week, $2 the second week, $3 the third week, etc.

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