Americans using emergency savings to cover everyday bills
Bankrate: 80 percent of people who used their emergency savings in the past year used the money for essentials
(InvestigateTV) — Bankrate reports that 37 percent of Americans have had to tap into their emergency savings within the past year.
Greg McBride, chief financial analyst for Bankrate said that alone is not alarming. However, how people used the money they were pulling out of savings did cause alarm.
“A little more than half said they needed it for unplanned expenses which is exactly what it’s there for,” McBride shared. “But 38 percent said they were tapping the emergency savings for regular monthly bills like rent or utilities. 32 percent said they were tapping the emergency savings for day-to-day expense, things like food and supplies.”
He said both of those really speak to the strain that many household budgets are feeling and the susceptibility many households have to any sort of fluctuation in income.
Bankrate found when people do tap into their emergency savings it tends to be a meaningful amount of money. More than half said they needed at least a thousand dollars.
“This means a couple of things, one you’ve got to have a habit of regularly putting money into the emergency savings so that when a need arises you have a buffer to absorb it and you’re not having to resort to credit card debt that’s above 20 percent,” he pointed out. “But then also once you do access that money, then you’ve got a pathway to replenishing that.”
He said the easiest way is to set up a direct deposit from the paycheck to a savings so that the savings happen automatically. This helps people replenish their after some of it has been used.
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