A recent survey by Bankrate has revealed that a growing number of Americans are struggling to save for emergencies due to high inflation and increasing interest rates. The survey found that over a third of respondents, or 36%, had more credit card debt than emergency savings. This is an increase from 22% who were in the same situation a year ago. The survey also highlighted that many Americans are using their emergency savings or taking on credit card debt, or both, to cope with the current economic situation.
It's particularly concerning that many people have little to no money in reserves, especially with the rising cost of basic necessities such as food and gasoline. There are also concerns that the country may be heading into a recession. The Federal Reserve has been hiking its benchmark interest rate to counter the economy's rapid rebound from the pandemic, causing higher borrowing costs for consumers with auto loans, mortgages, and credit card balances. The rising interest rates have made it challenging for some borrowers to repay their debts.
The Bankrate survey polled approximately 1,000 people and found that respondents cited inflation or being unemployed as the biggest barriers to saving more. The survey also revealed that around 15% of respondents had no credit card debt and no savings. Mark Hamrick, Bankrate's Senior Economic Analyst, expressed concern about this, stating that anyone without savings or access to credit risked financial stress or worse when hit with an unexpected expense.
To avoid financial stress, it's important to prioritize emergency savings. This can be done by setting a budget, cutting unnecessary expenses, and considering debt consolidation or debt relief options to free up money for savings. With the current economic climate, it's essential to plan for the unexpected and build a financial cushion to weather any storms.