Recent research has shown that the majority of Americans are financially unprepared to take care of an emergency bill between $500 and $1000. 63% of Americans claimed that they would not be able to handle such a bill for car, house repairs or any other type of emergency without borrowing the money from elsewhere.
Living just one bill away from serious financial problems is not an ideal situation, but it appears to be the reality for a lot of families and individuals. There are various factors that have led to such a savings squeeze and a few steps towards escaping such a situation.
A Stronger Economy
Despite the global and national economy being in a much stronger position, a lot of average Americans personal finances are not. The median household income started to increase for the first time since the recession before dropping again to $53,657, compared to the highs of nearly $58,000 in 1999.
Given the rise in inflation as well, this actually means many workers and families are relatively worse off. This has made it much harder for people to save as much as they were doing before, and due to more people being out of work across that period, savings have had to be dipped into as well.
There seems to be more positive news regarding the US economy nowadays, but there is still somewhat a disconnect that goes under the radar. While unemployment numbers have declined, the price of food and other goods has increased as wages stay at a similar level or at least do not match inflation.
American workers have also seen more job losses and cuts in their hours that have reduced income, while still having to afford healthcare and other bills. It has all combined to mean many aren’t living day to day exactly, but struggle to put much aside in savings for emergencies.
Budgeting in order to be able to put aside a certain amount of money each week or month is the first step. Opening a savings account, for those that can afford it, is an ideal option to make the most of interest and begin increasing your funds.
This will ensure that should a nasty medical bill or other crop up that you will be able to cover it. It is a much more preferable option to borrowing money and ending up with increased debt and becoming further unprepared for emergency charges.