An uncertain economy is affecting how Americans are able to save for emergencies. Only 43 percent of people would pay for an emergency expense of $1,000 or more from their savings, according to a new Bankrate survey.

This data comes from Bankrate’s yearly emergency savings report, an exclusive survey done by Bankrate and polling partner SSRS. Since 2014, the survey has annually polled 1,000+ U.S. adults about their level of emergency savings. The most recent data, polled in December 2022, also examines how interest rates affect savings and if people are worried about affording their bills if they lose their income.

Though paying from savings was the most popular option for how to pay for an emergency expense, 25 percent of people say they would use a credit card and pay it off over time, 11 percent say they would borrow money from family or friends and 4 percent would take out a personal loan. Along with over half (57 percent) of U.S. adults saying they wouldn’t pay for an emergency from savings, unemployment and the high cost of everyday expenses are a real financial risk for many Americans amid economic uncertainty.

While the unemployment rate has remained historically low, too many Americans continue to live paycheck to paycheck. It is especially concerning because we’re on high alert for the possibility of a recession when jobs would be lost.

— Mark HamrickBankrate senior economic analyst

Key statistics on emergency funds and personal savings

Lightbulb
  • Emergency savings need a boost. Only 43% of U.S. adults would pay for an unexpected emergency expense from their savings, with lower-income households, women and younger generations being less likely than their counterparts.
  • Credit card dependency at a record high. 25% of people would accrue credit card debt to pay for a $1,000 emergency expense and pay it off over time — a record percentage since polling started in 2014.
  • Inflation, unemployment are to blame. 74% say economic factors are causing them to save less right now, including 68% who say inflation is to blame (up from 49% last year) and 44% who say changes in income and employment are holding them back.
  • Consumer concern is high. 68% of people are worried they wouldn’t be able to cover their living expenses for just one month if they lost their primary source of income, including 85% of Gen Zers — the most concerned of any generation.

Less than half of adults would pay for a large expense with their savings — a quarter would pay with a credit card instead

Source: Bankrate survey, Dec.16-19, 2022

The amount of people who would pay for a $1,000 emergency expense from savings remains relatively unchanged after years of improvement. In January 2022, Bankrate found that a record-high 44 percent of people would pay $1,000 from savings, but the amount only dropped to 43 percent in December 2022.

Instead of using savings, 25 percent of people would pay for an unexpected $1,000 expense using a credit card while paying it off over time — the largest percentage saying they would use a credit card in the history of Bankrate’s survey since 2014.

Source: Bankrate surveys, 2019-2023

“With 1-in-4 Americans telling us they’d react to a large emergency expense by using a credit card, their timing couldn’t be worse,”  Bankrate Senior Economic Analyst Mark Hamrick said.

“On average, credit card interest rates are the highest we’ve seen and are slated to go higher as the Federal Reserve continues to hike. Under the best of circumstances, this debt should be paid before costly interest charges hit the account.”

Generally, 40 percent of people, instead of using their emergency savings account, would need to borrow the money in some form: using a credit card and paying it off over time (25 percent), borrowing from friends and family (11 percent) or taking out a personal loan (4 percent).

Younger generations are less likely to pull from savings to cover a surprise expense

Source: Bankrate survey, Dec.16-19, 2022

At 56 percent, baby boomers (ages 59-77) are more likely than younger generations to pay from savings when faced with an emergency expense. Gen Xers (ages 43-58) are the most likely to say they would pay for an emergency expense with a credit card and pay it off over time, at 29 percent.

Only 31 percent of Gen Z would pay for an emergency from savings — the smallest percentage of any generation. That’s significantly down from January 2022, when 42 percent of Gen Z would pay for a $1,000 emergency from their savings.

Paying for a surprise expense from savings, by household income

Willingness to pay a surprise expense from savings rises as people report higher household incomes. People in households making less than $50,000 a year are the least likely to pay for a surprise expense from savings, at 23 percent, compared to 71 percent for households making $100,000 or more a year.

Additionally, 60 percent of those who graduated college would pay a $1,000 expense from savings, compared to only 29 percent of those with a high school diploma or less.

Paying for a surprise expense from savings, by gender

Men were far more likely than women to say they would pay a $1,000 expense from savings, with 50 percent of men reporting they would do so, versus 37 percent of women. Women were more likely to finance a surprise expense with a credit card at 27 percent, compared to 22 percent of men.

Nearly 3 in 4 are saving less due to economic factors such as inflation, rising interest rates and employment changes

Inflation led to rising prices over the last year for everyday goods like groceries and gas, leading to fewer people being able to save for emergencies — 74 percent of people said economic factors such as inflation/rising prices, rising interest rates or changes in income or employment caused them to save less.

A significant portion of those with lower incomes and less education are saving less due to economic factors —  80 percent of people in households making under $75,000 a year were saving less due to at least one economic factor, compared to 64 percent of people in households making over $100,000 or more per year. 78 percent of those with a high school education or less were saving less, compared to 68 percent of those with an undergraduate college degree or more.

Source: Bankrate survey, Dec.16-19, 2022

When comparing different economic factors, 68 percent of people are saving less due to inflation or rising prices, up from 49 percent in January 2022.

The number of people who have not had their savings impacted by inflation nearly halved since January 2022. Only 17 percent of people said that inflation and rising prices are not having an impact on their savings, significantly down from 33 percent of people who said so in January 2022.

Older millennials, or those between 34 and 42, are the demographic most likely to be saving less due to inflation, with 76 percent saying they’re saving less.

Also, 62 percent of those with a college degree said they were saving less due to inflation, compared to 71 percent of those without a college degree.

How rising interest rates are impacting savings

Just under half of U.S. adults (48 percent) said that they were saving less due to rising interest rates. 60 percent of Hispanic Americans and 64 percent of Black (non-Hispanic) Americans said they were saving less due to interest, compared to 44 percent of White (non-Hispanic) Americans.

“One of the upsides of rising interest rates is the more generous returns being paid on savings,” Hamrick said. “For those who have been or are planning to sock money away for emergencies, it truly pays to shop around for the best rates, as high-yield savings yields are the highest since 2008. This is a situation where having more money to work with, including higher yielding returns, can make an important difference.”

How changes in income or employment status are impacting savings

We asked: When it comes to saving for unexpected expenses, would you say that a change in income or employment status is causing you to save less, save more or not having any impact on how you’re saving for unexpected expenses?

U.S. adults who say a change in income or employment status is causing them to … Percentage
Save less 44%
Save more 20%
Not having any impact 36%

Source: Bankrate survey, Dec.16-19, 2022

Of all economic factors Bankrate surveyed about, people said that a change in income or employment status was the least likely cause for them to save less; however, 44 percent of people are still saving less due to a change in income or employment.

Gen Zers are the most likely to be saving more due to a change in income or employment status, with 33 percent of Gen Zers saving more, versus only 10 percent of baby boomers.

More than 2 in 3 Americans would be worried about having enough emergency savings to cover a month’s worth of living expenses

Source: Bankrate survey, Dec.16-19, 2022

Creating a savings cushion typically starts with building three months of emergency savings in case of losing your job or taking an income hit. However, Bankrate’s survey shows most people are concerned about having that landing pad.

68 percent of people say they would be worried they wouldn’t be able to cover their living expenses for a month if they lost a primary source of income tomorrow, including 45 percent who would be very worried. Only 14 percent of people would not at all be worried.

If put in an income pinch, women would be much more likely to be worried about being able to afford a month of living expenses (72 percent), compared to men (64 percent).

Non-White Americans are also more likely to be worried about affording a month of their living expenses than White Americans. 63 percent of Hispanic Americans and 54 percent of Black (non-Hispanic) Americans said they were very worried, compared to only 39 percent of White (non-Hispanic) Americans.

More than 3 in 4 millennials and Gen Zers are worried about their emergency savings levels

Source: Bankrate survey, Dec.16-19, 2022

85 percent of Gen Zers would be worried about their ability to pay for a month’s living expenses if they lost a primary source of income, the most of any age group. 79 percent of millennials would be worried. Only 53 percent of baby boomers, compared to 69 percent of Gen Xers would be worried.

Savings worries, by household income

Those with a lower yearly income or less education are far more likely to be worried about their ability to cover a month’s expenses if they lost their primary income. 82 percent of those in households earning under $50,000 a year would be concerned about their ability to cover a month’s expenses, compared to 48 percent of those in households making over $100,000.

Similarly, 77 percent of those with a high school education or less would be worried, compared to 52 percent with a college education or more.

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 job. 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

Experts commonly recommend saving three to six months of expenses in case of emergencies. 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. This is not a concrete rule; you may need to save more if you are self-employed and anticipate a lean month, or if you are preparing for the possibility of a recession.

2. Open a savings account just for emergencies

Different savings accounts can allow you to stash emergency funds safely and allow you quick access when you need them. An online savings account, money market account, money market mutual fund or a separate savings account with your existing bank or credit union can allow you to save emergency funds.

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.

Methodology

This study was conducted for Bankrate by SSRS on its Opinion Panel Omnibus platform. The SSRS Opinion Panel Omnibus is a national, twice-per-month, probability-based survey. Interviews were conducted from Dec. 16-19, 2022 among a sample of 1,028 respondents in English (1,003) and Spanish (25). The survey was conducted via web (998) and telephone (30). The margin of error for total respondents is +/-3.5 percentage points at the 95 percent confidence level. All SSRS Omnibus data are weighted to represent the target population.