Inflation making US households uneasy about emergency savings

Inflation making US households uneasy about emergency savings

As record inflation has pushed up consumer prices, some U.S. households are worried about their emergency savings, according to a new survey.

More than half of 1,025 adults (58%) surveyed by Bankrate between June 3 and 5, 2022, said they were concerned about the amount they have in emergency savings, up from 48% in 2021 and 44% in 2020. Among of those who were not comfortable with their emergency fund, 75% had no savings or not enough to cover at least three months of living expenses. Only 43% of those who were very uncomfortable have savings.

As for the 42% of respondents who are very or somewhat comfortable with what they have saved, 82% have saved at least three months of expenses.

Among households earning over $100,000, more than half (59%) were somewhat or very comfortable with their emergency savings, while less than half (46%) of those earning between $50 $000 and $99,999 said they were comfortable with their emergency fund. Among households earning less than $50,000 a year, 37% had no emergency savings.

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Emergency fund

As record inflation has pushed up consumer prices, many U.S. households are feeling uneasy about their emergency savings, according to a new survey. (iStock/iStock)

Only 38% of Millennials (26-41) were somewhat or very comfortable with their emergency savings, compared to 41% of Gen X (42-57) and 49% of Baby Boomers (58-76 year).

Only 24% of adults surveyed by Bankrate said they have more money in an emergency fund than a year ago. By comparison, 32% said they had the same amount of savings, 34% said they had less savings, and 10% said they had no savings then or now.

Just over a quarter (27%) of households surveyed had enough savings to cover at least six months of expenses, up from 25% in each of the past two years. Meanwhile, 22% of households surveyed had enough savings to cover three to five months of expenses – the highest percentage since 2011. In total, 28% of households had savings, but not enough to cover three months of expenses.

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In May, the consumer price index – a broad measure of the price of everyday goods, including gas, groceries and rents – rose 8.6% from a year ago. a year.

Last week, the Federal Reserve raised its benchmark interest rate by 75 basis points for the first time in nearly three decades. The move puts the benchmark federal funds rate in a range between 1.50% and 1.75%, the highest since the pandemic began two years ago.

Officials also set an aggressive course of rate increases for the rest of the year. New economic projections released after the Fed’s two-day meeting showed policymakers expect interest rates to reach 3.4% by the end of 2022, which would be the lowest level high since 2008.

Fed Chairman Jerome Powell told reporters at a press conference after the meeting that another 75 basis point or 50 basis point hike was on the table for his July meeting.

Jerome Powell

Federal Reserve Chairman Jerome Powell addresses the Senate Banking, Housing, and Urban Affairs Committee as he presents the Monetary Policy Report to the committee on Capitol Hill, Wednesday, June 22, 2022, in Washington. (AP Photo/Manuel Balce Ceneta/AP Newsroom)

Although the Fed aims to orchestrate a soft landing — the middle ground between containing consumer demand and inflation without crushing economic growth — Powell told the Senate Banking Committee during his testimony on Wednesday that it would be “ very difficult”.

Goldman Sachs, Bank of America and Deutsche Bank have all raised the odds of a downturn in 2022 or 2023, and Powell admitted there is a real possibility of a recession. More than 60% of executives expect a recession in the next 12 to 18 monthsaccording to a survey of CEOs and other senior executives by The Conference Board, a business research firm.

FOX Business’ Megan Henney contributed to this report

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