Only 38 percent of Americans have enough money in their savings accounts to pay for unexpected expenses such as a 1,000 Dollars emergency room visit or a 500 Dollars car repair, according to a new Bankrate.com report. Others would raise the money by reducing spending elsewhere, borrowing from family/friends or using credit cards.
The ability to use savings for unexpected expenses increases with age, income and education level:
- 44 percent of senior citizens have enough savings to cover unexpected expenses, compared with 33 percent of millennials
- 62 percent of those with annual household income of $75,000+ have enough savings to cover unexpected expenses, more than two and a half times the number of people with annual household income under $30,000 who can say that
- 52 percent of college graduates have enough savings to cover unexpected expenses versus 32 percent of those without a college degree
The survey found that 82 percent of Americans keep a household budget, up from 60 percent in 2012. Even in this electronic age, most people keep a budget the old-fashioned way, either with a pen and paper (36 percent) or in their heads (18 percent). Just 26 percent use a computer program or smartphone app. While millennials are more likely to keep electronic budgets than older adults, even millennials favor non-electronic budgets.
"A solid majority of Americans say they have a household budget, which is a good thing. But too few have the ability to cover expenses outside their budget without going into debt or turning to family and friends for help," said Claes Bell, CFA, Bankrate.com banking analyst.
"Also, with so many good budgeting apps, websites and computer programs out there, those relying on analog budgeting methods such as paper and pen, or simply keeping track of expenses in their head, could be missing an opportunity to make their budgeting easier and more effective."
In terms of how people are spending their money, other than rent/mortgage payments, the most popular answer was utilities (such as electricity, water and phone bills), followed by transportation costs (including gasoline and car loans), medical expenses and student loans.
The survey was conducted by Princeton Survey Research Associates International (PSRAI) and can be seen in its entirety here
Source: Bankrate, Inc.
