U.S. households have a savings problem, particularly in emergency savings, which can cover financial obligations when a breadwinner suffers a major injury or illness or loses their job through a layoff.
The challenge is that too few Americans are building emergency savings.
A case in point. Only 30 percent of U.S. adults say they can cover an emergency expense of $1,000 or more from savings, said Bankrate in a new report. Overall, 47 percent of Americans say they have sufficient liquidity or access to funds to cover a $1,000 emergency expense, the study noted.
Why the dearth of emergency savings accounts? Bankrate points to years of high inflation, resulting in ongoing affordability challenges that strain Americans' savings. The study also noted that 33 percent of Americans say they would go into debt to pay a $1,000 emergency expense, either by using a credit card and paying it off over time. Almost 20 percent say they’d be forced to borrow cash from friends and family.
Building a Solid Household Emergency Savings Account
While it’s tough to set aside cash for emergencies when a household budget is tight, it can be done if you apply a healthy dose of discipline and creativity. These steps should get you over the goal line.Take a Bite-by-Bite Approach to Savings
Hamrick noted that the most prudent path to success with short-term savings goals doesn’t involve major moves; instead, it requires taking small steps. “Aim for an initial target of $500 in emergency savings, then automate your deposits, and park your cash in a high-yield savings account where it helps your nest egg to grow,” Hamrick advises. “Eventually, having funds to cover three-to-six months of expenses is the recommended target.”Make Automatic Contributions With Every Paycheck
To keep the emergency savings train rolling, set up automatic savings with your bank every week, even if it’s only a small deposit.“$50 per paycheck is better than nothing,” Ilir Salihi, founder and senior analyst at IncomeInsider.org, told NTD News. “Then keep building until you have enough set aside to cover at least three months of basic living expenses, followed eventually by six months' worth.”
Treat the Emergency Fund Like a Bill that Needs to Be Paid on Time
If you pair your emergency savings with a monthly debt, like utilities, phone, or mortgage/rent, automate a modest amount, and you’ll gain ground on your savings goals. “Even if it’s $25 or $50 per paycheck, just pay the bill,” Scott Oosterhouse, founder of Every Dollar Grows. “Keep it separate from checking so it’s not accidentally spent. And increase contributions only after cash flow feels stable, not before.”Set a Realistic Pace and Keep at It
Oosterhouse advises taking a measured approach with your emergency savings fund.“Don’t start aiming too big and too fast,” he said. “Often, people try to build a ‘perfect’ emergency fund while still living on tight margins, then feel like they’ve failed when they have to use it.”
Yet using the fund doesn’t mean it didn’t work; it means the emergency account did its job. “When that happens, the right move is simply to pause, regroup, and start rebuilding when things stabilize again,” Oosterhouse noted. “That mindset keeps the emergency fund from becoming another source of guilt instead of a tool for stability.”