Americans’ Savings for Emergencies Falling Short

Americans’ Savings for Emergencies Falling Short

Feb. 26, 2007
By MARK DAVIS
The Kansas City Star

Only 40 percent of Americans have separate emergency savings to handle unexpected car repairs or similar events, said a survey released this morning for America Saves Week.

Young, poor and minority adults were least likely to have set aside money to handle a brake job or dental repairs, according to the announcement from the Consumer Federation of America. The survey kicked off America Saves Week aimed at boosting savings, particularly among low- and moderate-income households.

The lack of savings means many consumers run to credit cards or pay day loans to cover such emergencies, building up debt instead of getting ahead with savings.

Bill Binzel, with the National Foundation for Credit Counseling, said even consumers who are trying to pay off credit cards or other costly debt should be saving some small amount for the next emergency.

George Barany, the Consumer Federation’s coordinator of America Saves Week, said the benefit of the smallest savings accounts can stir consumers to pursue larger savings goals, such as a down payment for housing or three-to-six months of living expenses in case of unemployment.

The survey of 1,000 Americans earlier this month found that 81 percent of adults who have separate emergency savings believe it will be enough to handle surprises this year. About half of their accounts held at least $2,000 and 60 percent held at least $1,000.

Only 19 percent of adults under 25 had emergency accounts, the survey found. Fewer than a fourth of households with incomes below $25,000 had accounts, and fewer than a third of African-American adults and Hispanic-American adults surveyed had accounts.

In contrast, the survey found 58 percent of households with incomes of $75,000 or more had separate emergency funds.

The groups said regular savings worked best to build up needed emergency funds. Possible sources include tax refunds, automatic transfers from checking accounts or paychecks, and even loose pocket change deposited in a bank account periodically.