Bankrate’s 2023 annual emergency savings report

As inflation and economic uncertainty continue to affect Americans, only 48 percent of U.S. adults say they have enough emergency savings to cover at least three months’ worth of expenses, according to a new Bankrate survey. That percentage has remained stagnant since it was 49 percent in 2022, when inflation was at a 40-year high.

This data comes from Bankrate’s yearly emergency savings report, an exclusive survey 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 May 2023, also examines people’s comfort with their level of emergency savings and how often they add money to their savings fund.

Common personal finance advice recommends having at least three months of expenses saved for emergencies like a job loss or an unexpected medical bill. As a significant portion of Americans don’t have an emergency fund for three months of expenses, 57 percent of U.S. adults are uncomfortable with the emergency savings they currently have. One-third (33 percent) are “very uncomfortable” and 24 percent are “somewhat uncomfortable” with their level of emergency savings.

Key statistics on emergency funds and personal savings

More than one in five Americans have no emergency savings

Though more than half of Americans don’t have at least three months of emergency expenses saved, more people year-over-year have some degree of emergency savings in 2023, according to Bankrate. Nearly one in three (30 percent) people in 2023 have some emergency savings, but not enough to cover three months of expenses. This is up from 27 percent of people in 2022.

Source: Bankrate survey, May 19-22, 2023

Nearly one in four (22 percent) U.S. adults say they have no emergency savings. Despite economic challenges, the percentage remains relatively unchanged year-over-year. Last year, 23 percent of Americans had no emergency savings.

Because building savings takes time, Bankrate Chief Financial Analyst Greg 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 said.

Younger Americans, who are less likely to have built that habit, are more likely to have little to no emergency savings. Nearly one-third (31 percent) of Gen Zers (ages 18-26) do not have emergency savings — more than twice as many as the 15 percent of baby boomers (ages 59-77) who have no emergency savings. Baby boomers are also more than three times as likely to have enough savings to cover six months or more of expenses as Gen Zers (47 percent and 13 percent, respectively).

How much emergency savings someone has rises as they grow older and wealthier. The difference in emergency savings levels is particularly stark between different income brackets. Households with a yearly income under $50,000 a year are more than seven times more likely to have no emergency savings than households who make $100,000 a year or more:

Source: Bankrate survey, May 19-22, 2023

Geographically, Westerners (55 percent) and Midwesterners (52 percent) are most likely to have enough emergency savings to cover three months of expenses or more compared to Southerners (42 percent) and Northeasterners (47 percent).

Source: Bankrate survey, May 19-22, 2023

More than half of Americans are uncomfortable with their level of emergency savings

More than half of U.S. adults (57 percent) feel uncomfortable about their current level of emergency savings. That includes 33 percent who are “very uncomfortable” with their level of savings and 24 percent who were “somewhat uncomfortable.” Only 43 percent of Americans are comfortable with their current level of savings: 15 percent are “very comfortable” and 28 percent are “somewhat comfortable.”

Source: Bankrate survey, May 19-22, 2023

More than half (56 percent) of baby boomers are comfortable with their level of emergency savings, an 18 percent leap above Gen X (ages 43-58), the generation with the second-highest comfort level. In comparison, 32 percent of Gen Zers and 37 percent of millennials (ages 27-42) are comfortable with their level of emergency savings.

Higher-income households are also more likely to feel more comfortable with their level of emergency savings. About two-thirds (67 percent) of households with an income under $75,000 a year are uncomfortable with their current level of emergency savings, compared to 41 percent of those who earn $75,000 or more a year.

The majority (84 percent) of those with at least six months’ worth of emergency savings are comfortable with their level of savings. Also, 92 percent of Americans who are “very comfortable” with their current level of emergency savings have enough to cover at least 3 months of expenses.

Those uncomfortable with their savings tend to have less than three months of expenses put aside:

• 37 percent have no savings.
• 41 percent have less than three months of expenses saved.
• 22 percent have three months of expenses or more saved.

“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 said.

Nearly 2 in 3 Americans would need six months’ worth of emergency savings to feel comfortable

Two-thirds (64 percent) of U.S. adults say they would feel comfortable about their savings when they have enough to cover six months of expenses:

We asked: What’s the minimum amount of emergency savings you would need to feel comfortable?

Source: Bankrate survey, May 19-22, 2023

In comparison, 25 percent would feel comfortable if they had enough savings to cover three to five months of expenses. Only 9 percent would be comfortable with having some but less than three months’ of expenses.

In a priority shift, 88 percent of people in 2023 say they wouldn’t be comfortable with their emergency savings until they have enough to cover at least three months of expenses, up from 72 percent in 2019.

Over half of employed Americans add to their emergency savings at least monthly

Like any habit, building a savings account takes time and consistency. More than half of (56 percent) employed Americans contribute to their emergency savings accounts at least monthly: 29 percent contribute every paycheck, and 26 percent contribute once a month.

Source: Bankrate survey, May 19-22, 2023
Note: Employed Americans only

As for those who contribute to their savings account less frequently, 18 percent of workers contribute every couple months, 8 percent of workers contribute once a year and 6 percent contribute less than once a year. Over one in 10 (13 percent) never add to their emergency savings.

Just as they are more likely to have more funds in their emergency savings, higher income workers are more likely to contribute to their savings more frequently. Half (50 percent) of workers who make less than $75,000 a year add to their emergency savings at least monthly, compared to 63 percent of workers who make more than $75,000 a year.

While Northeasterners were the most likely in Bankrate’s poll to have no emergency savings, they’re contributing frequently. Just under two in five (38 percent) Northeasterners add to their emergency savings every paycheck, the most of any region, more than the 31 percent of Midwesterners, 29 percent of Southerners and 23 percent of Westerners.

As of January, over 1 in 3 Americans have more credit card debt than emergency savings — highest on record since 2011 polling

Over a third (36 percent) of people have more credit card debt than emergency savings, the highest percentage in 12 years of Bankrate asking this survey question. In comparison, 22 percent of people had more credit card debt in January 2022, while 28 percent of people had more credit card debt in January 2020, before COVID-19 began to affect the U.S.

The majority (51 percent) of U.S. adults still say the amount in their emergency fund or savings account is higher than their credit card debt. The smallest percentage of people (13 percent) said they have no credit card debt and no savings.

“It is quite stunning that such a high percentage of adults has no savings and no credit card debt,” Bankrate Senior Economic Analyst Mark Hamrick said. “Anyone with no such savings, including those without access to credit, risks tremendous stress, or worse, on their personal finances when hit with a significant unplanned expense such as a major home or auto repair.”

Competing priorities: building emergency savings vs. paying down debt

In periods of economic uncertainty, it’s a good idea to try to pay down debt quickly and build up your emergency savings in case of a loss of income. It’s not always possible to do both at once, but Bankrate’s survey found a little more than a third (34 percent) of people are prioritizing both paying down debt and focusing on increasing emergency savings.

“For those wisely focused on managing and building their emergency savings, this is an opportune time to benefit from the increase in interest rates,” Hamrick said. “Emergency savings, by definition, needs to be liquid or easily accessible. A high-yield savings account dedicated to this purpose amounts to a self-insurance policy guarding against unplanned expenses.”

As of December, less than half of adults would pay for a large expense with their savings — a quarter would pay with a credit card instead

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.

“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.”

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.

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 impacting their savings, significantly down from 33 percent who said so in January 2022.

How rising interest rates are impacting savings

Just under half of U.S. adults (48 percent) said they were saving less due to rising interest rates. “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

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. 20 percent said that a change in their income or employment status is causing them to save more and 36 percent said those changes aren’t having an impact.

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

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.

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 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

  The study (that was conducted in May 2023) was conducted by SSRS on its Opinion Panel Omnibus platform. The SSRS Opinion Panel Omnibus is a national, twice-per-month, probability-based survey. Data collection was conducted from May 19 – May 22, 2023 among a sample of 1025 respondents. The survey was conducted via web (n=995) and telephone (n=30) and administered in English (n=1000) and Spanish (n=25). The margin of error for total respondents is +/- 3.4 percentage points at the 95% confidence level. All SSRS Opinion Panel Omnibus data are weighted to represent the target population of U.S. adults ages 18 or older.
  
  The study (that was conducted in January 2023) 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 January 20-23, 2023 among a sample of 1,032 respondents in English (1,007) and Spanish (25). This survey was conducted via web (1002) and telephone (30), while surveys prior to 2023 were conducted entirely via telephone. The margin of error for total respondents is +/-3.7 percentage points at the 95% confidence level. All SSRS Omnibus data are weighted to represent the target population.
  
  The study (that was conducted in December 2022) 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.