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Sixty Percent of Americans Can’t Afford an Emergency

[Friday, February 3rd, 2017]

If you suddenly needed to fix your car, or visit the emergency room, would you be able to cover the unexpected cost?

Many Americans say they could not. In a recent survey, nearly six in 10 people said they couldn’t come up with the funds to cover a $500 car repair or a $1,000 emergency room bill.

If they couldn’t afford the repair, or the hospital visit, what would folks do? Forty-one percent said they could rely on savings, but 21% would have to put the expense on a credit card. Twenty percent said they’d slash their spending in other areas and tighten their budgets, and 11% would turn to friends or family for help.

Income and education affect savings

It’s not a surprise that people who were more educated and had higher incomes were better able to face emergency situations and fund them with their savings accounts. Still, nearly half of households made up of college graduates making more than $75,000 per year said they could cover that extra $500 expense.

Perhaps it will surprise some to learn that young people are more equipped than older folks to pay that unexpected expense from their savings account. Forty-seven percent of Millennials said they could use savings to pay for an emergency. Two years ago, only 33% said they could come up with the extra $500. Older folks, or the so-called Silent Generation, were most likely to use a credit card to pay for an emergency.

Savings accounts are vital

Financial advisors and experts say it’s smart to have at least three months worth of savings in a rainy day fund, in case of an emergency. Things can go wrong with houses, health, cars, children, and pets, and all of these can require hefty sums to fix. It’s even better to have six months of savings built up, just in case. It’s better to be well prepared than caught off guard in that kind of situation.

Methodology

Princeton Survey Research Associates conducted telephone interviews with a representative sample of 1,003 adults living in the continental United States, between January 5 and 8, 2017.

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