< /p> More than half of Americans live “paycheck to paycheck”/Collage by Radio MAXIMUM
Most Americans – 56% – say they cannot afford an emergency expense of $1,000. This is according to a recent report by Bankrate.
Only 44% of Americans surveyed said they could use their savings to pay for unexpected expenses. Instead, they decided to put them on a credit card or borrow cash from family or friends, writes CNBC.
“The reality is, unfortunately, we essentially live in a paycheck-to-paycheck country. We have a consumption-based society where people are constantly being told to spend money and not being told how to save it.” often,” Bankrate senior economic analyst Mark Hamrick said in an interview with CNBC's Make It.
Unexpected economic events that have occurred in rapid succession over the past five years, from the effects of the pandemic to the high inflation, have shocked the personal finances of many Americans, Hamrick says.
In today's environment, it's very surprising that even with low unemployment and a labor market that has been strong and resilient in recent years, we still have this extremely low percentage of Americans who can afford these extraordinary expenses,
he adds.
Regardless of how much you have saved, economic conditions now are the perfect time to focus on creating emergency savings, says Hamrick.
Nearly a decade of low interest rates, followed by a period of high inflation and interest rate hikes by the Federal Reserve, has created a favorable environment for those looking for high-yield savings products.
Despite high credit card interest rates, 21 % of Americans told Bankrate that they would choose a credit card to fund an emergency $1,000 and pay it off over time.
Part of Americans are not inclined to save/Photo by pvproduction
There is a high price to pay, literally, for not having emergency savings situations. If you don't have enough savings for contingencies, there can be a real domino effect that can have a very negative impact on personal finances,
says Hamrick.
Depending on credit cards can delay the achievement of your financial goals, such as paying off debt or saving for retirement, since the high interest rates currently charged on credit cards can make it difficult to pay off debt.
But by building up emergency savings and using them to cover unexpected expenses, ” you solve your own problem,” says Hamrick.