When Emergency Savings Run Out, Folks Turn To Credit
Everyone knows it’s important to have money saved up in case of emergency, but just because something is common knowledge—and common sense—that doesn’t mean people necessarily follow it. A new survey shows that 66 million Americans don’t have any emergency savings at all.
Perhaps not surprisingly, people in the so-called “sandwich generation” are the most likely to run dry when it comes to savings. Many of these folks, also members of Generation X, roughly ages 36-51, are taking care of children and aging parents at the same time. Thirty-three percent of them don’t have any savings at all, compared with 27% of the general population ages 18 and older.
In general, the older people get, the more likely they are to have enough savings. The oldest demographic studied—known as “the Silent Generation,” or those people ages 71 and older—were the most likely to have substantial enough savings built up. Forty-seven percent of them had six months or more worth of savings stashed away.
Financial advisors usually recommend keeping at least six months’ worth of expenses at the ready in case of emergency. But only 28% of Americans actually have that much socked away, according to this report, which is done annually. The good news is that more people have savings this year than last year, when only 22% of folks had a nest egg that would cover at least six months.
Credit offers coverage in case of emergency
When people run low on savings, the first place they are likely to turn is their credit cards. Most people are able to get a credit card, even if their credit score isn’t perfect. A score of 700 or better is ideal, but even people with fair credit can get a credit card that will allow them to cover unexpected events, if their savings account isn’t up to the job.
Many credit cards for fair credit offer low annual percentage rates, introductory zero-percent APRs, balance transfer offers, cash back, and other rewards. While a credit card isn’t the best way to cover an emergency—a stable savings account is the better option—it can be a lifesaver for many.
This savings survey was conducted in June and included responses from 1,000 adults in the continental United States. Interviews were conducted by landline telephone as well as cell phone, in both English and Spanish.