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- Some Americans are seeing their emergency savings decline.
- New Bankrate results show that 39% of US adults have less emergency savings than last year.
- That can be concerning given today's economic situation of high inflation even with a strong labor market.
Some Americans have seen their emergency savings tumble from just a year ago.
A Bankrate survey that took place from January 20 to January 23 asked about how a respondent's emergency savings compared to these savings a year ago. About 4 in 10 US adults have fewer emergency savings than they did just a year prior, according to the survey conducted by SSRS. In addition to the 39% who reported this, there were "10% who had no emergency savings last year and still have none this year" per a Bankrate press release.
But not everyone has seen their emergency savings fall from where they stood a year ago. Just over a quarter actually have more emergency savings than a year ago, which may be important given inflation is still elevated and things like eggs and car repairs are expensive.
"The reality is that we need to have emergency savings to protect against all kinds or virtually any kind of unexpected expense," Mark Hamrick, senior economic analyst at Bankrate, told Insider.
Hamrick added that in just the last few years, "we've been through plenty of remarkable challenges" including a brief recession which "sent" millions "essentially to the unemployment lines, the virtual unemployment lines in two months, March and April of 2020."
Along with the January survey results "and the fact that most Americans do live paycheck to paycheck," Hamrick said this "shows we have more work to do with fortifying our personal finances against the unexpected, but yet predictable."
Data from the Bureau of Economic Analysis also shows that the personal saving rate had been dropping during 2022, reaching a low of 2.7% in June. However, the rate has picked back up since then, and in January 2023 was the same as the 4.7% rate in January 2022. People were able to build up savings and pay down debt with the help of stimulus checks and other aid during the pandemic. But as Wall Street Journal's Joe Pinsker wrote, Goldman Sachs estimated that Americans "will have exhausted" about two-thirds of their extra savings during the pandemic by the end of 2023.
Additionally, US inflation as measured by the consumer price index has been cooling, but is still elevated and impacting consumers. Overall prices were 6.4% higher in January compared to a year ago.
The Bankrate survey results suggest that for 36% of US adults, "their credit card debt outweighs their emergency savings" per a Bankrate press release. Hamrick said that's the highest share in the 12 years the company has asked about this.
"It's clear that the less-than-optimal economy, including historically high inflation coupled with rising interest rates, has taken a double-edged toll on Americans," Hamrick said in a press release. "Many have resorted to tapping their emergency savings if they have it, or have taken on credit card debt, or some combination. Adding to the challenge is the record high level of credit card interest rates, punitive for those who fail to pay off their balances immediately."
According to the Federal Reserve Bank of New York's Center for Microeconomic Data, credit card balances were at $986 billion in the fourth quarter of 2022. A press release from the New York Fed stated that this figure exceeds "the pre-pandemic high of $927 billion." While credit card balances altogether were high in the final quarter of the year, student and auto loan debt stood higher at $1.60 trillion and $1.55 trillion respectively.
While inflation is still high, the labor market is robust. That may be helpful for those looking to build their emergency savings.
"The fact that the job market remains quite strong with the unemployment rate recently moving to a historic low of 3.4%, still a high level of job openings out there, the strength of the job market remains an opportunity for people to try to leverage their employment opportunities to boost their incomes and along the lines for them to sock some of that money away," Hamrick said.
He added that "the returns being paid on savings now are the best that we've seen in over a decade in this rising interest rate environment."
"There's plenty of opportunity, plenty of targets for people to place their money," Hamrick said. "They just need to make sure that they have the capability and the desire to do that. And emergency savings is money of course that should be highly liquid for when and if they need to tap that money supply."
Have you changed your spending habits due to rising prices? Has inflation or other economic factors affected your emergency savings? Reach out to this reporter to share your story at mhoff@insider.com.