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Bankrate’s Financial Security Index rebounded to its best reading since November, buoyed by improved job security, rising wages and consumers’ increased comfort with debt.
The FSI, which takes into account Americans’ answers to questions about savings, job security, debt and other factors stands at 103, up from 101.5 in January.
Unemployment is at an 8-year low of 4.9% and average hourly and weekly earnings saw an uptick in the latest unemployment report, but despite that, the data also show that Americans aren’t increasing their savings.
Little progress on emergency savings
“The percentage of Americans with more emergency savings than credit card debt dropped in the past year,” says Bankrate’s chief financial analyst Greg McBride, CFA. “Currently, just 52% of Americans have more emergency savings than credit card debt, down from 58% in 2015.”
“The reading now is the same as in 2011 when the question was first asked, reflecting zero progress over that time,” McBride says.
The percentage of Americans with no credit card debt — but no savings either — jumped from 13% last year to 21% in 2016.
On a brighter note, the survey also asked Americans about credit card debt and found that only 22% have more credit card debt than emergency savings. That’s down from 24% last year and is the lowest in the 6 years the question has been asked.
Millennials more likely to set aside emergency funds
“Despite Americans’ lack of progress on emergency savings, they’re upbeat on other aspects of financial security,” McBride says.
While there was little difference between men and women when it came to savings and credit card debt, there was a notable variance when looking at age group and income levels.
Not surprisingly, millennials, or those adults under age 30, were more likely than the generations before them to set aside money in an emergency account, which McBride calls a “testament to both the savings discipline and aversion to credit cards characteristics of millennials.”
Millennials grew up during a period of plunging stocks, record unemployment and foreclosures, which taught them to prepare for the worst and be wary of debt.
The only group that is doing better with debt is senior citizens, or those 65 and older, who were least likely to have more in credit card debt than emergency savings.
Older generations more likely to carry credit card debt
Millennials are doing a good job of saving more, but that can’t be said of some of the other generations before them. The survey found that those between the ages of 30 and 49 were the most likely to carry more credit card debt than emergency savings. People age 50 to 64 were a close 2nd.
“Americans age 30 to 49 are the epitome of tight household budgets. Those are the years of mortgage payments, car payments, kids, braces, the whole enchilada,” McBride says. “Those age 50 to 64 are most prone to long-term unemployment that can deplete years’ worth of savings and result in accumulating debt.”
The survey also revealed that those with household incomes of $75,000 or more are twice as likely as households with income of less than $30,000 to have emergency savings that is larger than their credit card debt. But even though low wage earners aren’t saving any money, they also aren’t taking on debt.
Lower-income households more likely to have no credit card debt
The lowest income households were 4 times more likely than the highest income households to have no credit card debt or savings.
“Even though comfort level with savings has consistently deteriorated on a year-over-year basis, the reading was slightly better than January,” McBride says.
The Financial Security Index is based on a national telephone survey made in English and Spanish by Princeton Survey Research Associates International. The survey was conducted Feb. 4-7, 2016, with 1,002 adults living in the continental U.S. The survey has a margin of error of plus or minus 3.6 percentage points.
- 34% of males said they were better off today, compared with 26% of women.
- 40% of black respondents said they were better off today, compared with 27% of whites.
- 39% of households with income of more than $75,000 feel their overall financial situation has improved, compared with 23% of households with less than $30,000.
- 26% of people age 30-49 had higher credit card debt compared to 20% of people age 18 to 29. And, 25% of 50-64 year olds had more credit card debt than savings.
- Only 35% of households with income of less than $30,000 have more in an emergency fund than they do in credit card debt, compared with 71% of people making $75,000 or more.
- Of the respondents, 34% of blacks and 27% of Hispanics had no credit card debt and no savings. That compares to 18% of whites.
- 25% of men said they were more secure with their jobs, compared with 26% of females.
- 45% of black respondents felt more secure in their jobs today, compared with 21% of whites.
- Of those earning less than $30,000, 33% signaled an increased comfort level with their jobs, compared with 24% making $75,000 or more.
Note: Percentages may not total 100% due to rounding.