Buffalo, NY (WBEN) A new survey by Bankrate finds nearly half of Americans have less emergency savings than credit card debt and live 'paycheck to paycheck'.
It's a gloomy financial position for millions of Americans and inflation and rising interest rates aren't helping according to Bankrate's Mark Hamrick.
Hamrick says high inflation for about two years and interest rates on the rise have left many of us to see some winnowing away of Americans' emergency savings. "The majority of Americans live paycheck to paycheck," notes Hamrick. He says only 43 percent of Americans can pay an emergency expense of $1,000 or more from savings.
Hamrick says the survey finds 49 percent of Americans have either less or no emergency savings compared to a year ago, 10 percent had no emergency savings a year ago and still have none. "Credit card interest rates have been on the rise as the Federal Reserve has been raising interest rates for a year now. And we find that 36 percent of Americans have credit card debt that outweighs their emergency savings. And that is a record high in the 12 years," adds Hamrick.
Who has more emergency savings than credit card debt? "67 percent of 'boomers', those aged 59 to 77. That is compared to just 40 percent of members of Generation Z, those are people aged 18 to 26," says Hamrick. On the other side of the coin, millennials are at the top of that list, 45 percent of those, that happens to be people who are aged 27 to 42. Hamrick adds this is a function of trying to accomplish a variety of financial goals. "The reality is that's become more difficult in an environment where inflation has been rampant and continuing. And as interest rates have risen, the cost of borrowing is rising as the Federal Reserve raises interest rates."
Hamrick says when it comes to increasing savings, it's like trying to walk and chew gum at the same time. He cites data showing those who change jobs get more income, but if that's not in your future, the opportunity to get returns on savings right now in this higher interest rate environment through high yield savings is the best we've seen in over a decade. "While one might look around broadly and see the averages on things like certificates of deposit or high yield savings or traditional savings account, although it may not set the world on fire, one can certainly do much better by shopping around for the best rates where we see much higher returns being paid at certain institutions compared to others," advises Hamrick.
