Inflation is easing, but the effect on Americans’ budgets is not. In 2022, 40-year-high inflation cut into many U.S. adults’ ability to save. But while wealthier households’ savings have largely since bounced back, households with lower incomes often have less savings than before inflation peaked.

Nearly one in five (18 percent) households making between $50,000 and $74,999 a year had no emergency savings as of May 2023, up from 13 percent in both 2022 and 2021, according to Bankrate. Only 49 percent have more than three months of expenses saved — a common benchmark for emergency savings.

A similar percentage (47 percent) of people with an annual household income of $100,000 or more had at least six months of expenses saved in 2022. That share rebounded to 50 percent in May 2023, according to Bankrate.

Higher-income households may also be more likely to receive bonuses, investment income and other sources of wealth than lower income-households, allowing for more streams of income to put aside for emergencies. Though Americans are affected by inflation regardless of income, economic inequality means those in lower income brackets are affected disproportionately.

With inflation cutting into their paychecks, low-income households have had to make major financial sacrifices, such as saving less for retirement or emergencies and incurring more credit card debt. The bottom line is, inflation can fall on those least able to bear it — and the latest price burst is no exception. — Sarah Foster, Bankrate U.S. Economy Reporter

Key Bankrate insights on emergency funds and economic inequality

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  • Most lower-income Americans’ savings have been affected by inflation. 73% of those with an annual household income under $50,000 were saving less due to inflation, as of December 2022 polling.
  • Wealthier Americans are more than twice as likely to be comfortable with their savings. 62% of people with a yearly household income of $100,000 or more are comfortable with their level of savings, compared to 53% of people who make between $75,000 and $99,999 a year, 45% of people who make between $50,000 and $74,999 a year and 29% of people who make less than $50,000 a year, as of May 2023 polling.
  • About half of Americans have less than three months of expenses saved. 30% of U.S. adults have some, but less than three months, of expenses saved, and 30% have more than six months of expenses saved, as of May 2023 polling. 22% of Americans have no emergency savings and 18% have between three and five months of expenses saved.

Nearly 3 in 4 lower-income households are saving less due to inflation

The inflation rate was 4 percent in May 2023, according to the Bureau of Labor Statistics (BLS),  a significant improvement from summer 2022’s highs, but still higher than the Fed’s ideal 2 percent inflation rate.

Inflation impacts not only the price of everyday goods and services, but also peoples’ savings, as some dip into their emergency fund to afford necessities. More than two in three (68 percent) people who are saving less year-over-year cite inflation, according to December 2022 polling:

Source: Bankrate survey, December 16-19, 2022

Income-wise, nearly three in four (73 percent) households making under $50,000 or between $50,000 and $74,999 per year are saving less due to inflation. Though the majority (59 percent) of those with a $100,000 or more yearly household income are saving less due to inflation, they’re the income bracket least likely to do so.

The majority of lower-income households don’t have any cushion at all. In May 2023, lower- and middle-income earners were most likely to say they have no emergency savings:

Source: Bankrate survey, May 19-22, 2023; Bankrate survey, June 3-5, 2022
Note: Percentages may not add to 100% due to rounding

Generally, middle-income households making between $50,000 and $74,999 a year have seen a larger negative effect on their savings year-over-year than other income brackets. Those households became 5 percent more likely to have no emergency savings between 2022 and 2023. In contrast, households making $100,000 or more annually actually became 3 percent less likely to have no emergency savings.

More than 3 in 5 U.S. adults without emergency savings have less than $500 in the bank

Inflation impacts lower-income Americans in nearly every aspect of their finances, including their wages, debt and spending. As everyday goods become more expensive, inflation erodes how much you can actually purchase with your wages. In particular, those on fixed incomes — like Social Security — can see even bigger impacts. Though the Social Security Administration adjusts payments due to inflation, lower-income people and retirees may often have their investments in bonds and certificates of deposit (CDs). Those investments tend to be more vulnerable to losing value during high inflation.

Lower-income people also tend to spend more of their budget on goods vulnerable to spikes in price during inflation, like food, gas and heat, according to UC Davis. High prices like the record-breaking prices for gasoline in 2022 can take a larger relative percentage of someone’s budget when they are lower income. Additionally, higher-income people, who may be spending more on non-necessities, may be able to cut more spending from their budget than lower-income people, who may not spend much outside of necessities.

Also, households with no emergency savings often just don’t have the money to save: 64 percent of people with no emergency savings have less than $500 total in their bank accounts, according to March 2022 data from the Consumer Finance Protection Bureau (CFPB). In comparison, 83 percent of those with at least a month or more of income in emergency savings have $10,000 or more across their accounts.

Source: CFPB
Note: No Americans without emergency savings told the CFPB they have $5,000 or more in the bank.

3 resources to start saving on a low income

If you make a low income, you may have already made a budget, cut out non-essentials and paid off debt, but still have little discretionary funds each month. Saving is a key way to prepare for the future, but it’s not always easy. Here are three resources to help you build your emergency fund on a low or limited income:

  1. Individual Development Accounts (IDA). If you or your family receive funds from your state’s Temporary Assistance for Needy Families (TANF) program, you can be eligible to open an Individual Development Account (IDA), an account that matches your earnings from work. If you’re working and either eligible for TANF, or you have low income and low assets, you can be eligible for a Demonstration Project IDA, which matches your savings for a secondary education degree, the purchase of a first home or starting a business.
  2. Saving accounts for disabled individuals. Those who are disabled and on Social Security Disability Insurance or Supplemental Security Income will lose benefits if their assets exceed a limited amount, around $3,000 maximum. There are limited ways to help save, however. Achieving a Better Life Experience (ABLE) accounts allow you to open state-sponsored, tax-advantaged accounts to save if you become disabled before the age of 26. Additionally, the Plan to Achieve Self Support (PASS) program assists those with disabilities on returning to work.
  3. Other local programs. Check out your state’s TANF office to learn more about other programs and support you can receive to help with everyday bills.
  • 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 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.

    This study (that was conducted in June 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. Data collection was conducted from June 3-5, 2022, among a sample of 1,025 respondents. The survey was conducted via web (995 respondents) and telephone (30 respondents) and administered in English (1,000 respondents) and Spanish (25 respondents). The margin of error for total respondents is plus or minus 3.4 percent at the 95 percent confidence level. All SSRS Opinion Panel Omnibus data are weighted to represent the target population of U.S. adults ages 18 or older.

    This study (that was conducted in June 2021) was conducted for Bankrate via telephone by SSRS on its Omnibus survey platform. The SSRS Omnibus is a national, weekly, dual-frame bilingual telephone survey. Interviews were conducted from June 22-27, 2021 among a sample of 1,009 respondents in English (973) and Spanish (36). Telephone interviews were conducted by landline (202) and cell phone (807, including 542 without a landline phone). The margin of error for total respondents is +/- 3.74 percent at the 95 percent confidence level. All SSRS Omnibus data are weighted to represent the target population.