Home > Personal Finance > These Americans Are Still Having a Hard Time Saving for an Emergency

Comments 0 Comments

Americans are doing a little bit better at saving money in an emergency fund — but women, some minorities, young adults, and the less educated are still woefully unprepared for a financial emergency, according to a new study.

Overall, there have been marginal gains in the number of Americans who say they could come up with $2,000 to cover a surprise expense “in the next month,” according to the study published by the Financial Industry Regulatory Authority (FINRA), the financial industry’s self-regulatory board.

In 2012, 40% said they probably or certainly could not so do. In 2015, that number had fallen to 34%, FINRA says. Similarly, in 2012 some 35% said they were certain they “could come up with the full $2,000.” That number is now 39%. The improvements, while narrow, suggest the “financial fragility” of Americans is slowly easing.

Wide gaps among different demographic groups tell a far more pessimistic story, however. Here are some of the findings.

  • Gender: Women are in a much more fragile position. While 28% of men said they probably or definitely could NOT cover a $2,000 expense, fully 39% of women said they could not.
  • Age: Those over 55 are in a far stronger position. While only a quarter of that group said they probably/certainly could not raise $2,000 in a month, 43% of those under 34 said they couldn’t.
  • Ethnicity: Whites are better off than Blacks or Hispanics, but Asians are most prepared. While 30% of Whites said they probably/certainly could not come up with $2,000, only 24% of Asians said so. Hispanics (39%) fared worse than both groups. Most alarming however, is that nearly half of African Americans (48%) said they probably/certainly could not, making them the most fragile ethnicity. In fact, among demographic groups of all kinds, only those with incomes under $25,000 fared worse.
  • Income: Not surprisingly, income levels tracked tightly with financial fragility. Still, 11% of those earning more than $75,000 annually said they probably/certainly could not deal with a $2,000 emergency. One-third of those earning between $25,000-$75,000 said they could not, while 63% of those earning less than $25,000 said they couldn’t.
  • Education: School attainment levels were also a solid predictor of financial fragility. Only 18% of those with a college degree or more probably/certainly could not deal with a $2,000 emergency; but 45% of those with only a high school degree or less said they could not.

“Consistent with previous years, the 2015 NFCS finds that measures of financial capability continue to be much lower among younger Americans, those with household incomes below $25,000 per year, and those with no post-secondary educational experience,” FINRA said in its report. “African Americans and Hispanics, who are disproportionately represented among these demographic segments, also show signs of lower financial capability, making them more vulnerable.”

It’s important to note many of the demographics that appear to be having a harder time saving for emergencies have been found in various studies to earn less income than their counterparts.

Overall, the findings are consistent with plenty of other studies showing Americans are poorly prepared for financial emergencies. In March, for example, the Associate Press-NORC Center for Public Affairs released poll data with even bleaker numbers. Two-thirds of consumers in that study told the center they would have trouble coming up with funds to cover a $1,000 emergency.

Analysts have long wrestled with the problem of understanding Americans’ lack of savings. While the recession clearly made it harder for Americans to save, Americans weren’t great savers back in the boom years, either. In fact, by some measures, America’s overall savings rate fell below zero — the nation was spending more than it was earning — back in 2005.

Saving isn’t sexy, and it isn’t lucrative, either. Most traditional savings accounts offer barely perceptible interest rates, and even most Internet-only banks offer less than 1% returns.

The tax code is at least partly to blame, too. While tax-advantaged retirement accounts like 401K plans heavily encourage saving for the long term, there is no similar nudge to convince U.S. consumers to save for the short or medium term. Both Canada and the U.K. permit 401K-like accounts that encourage saving money to be used before retirement.  Lower-income Americans can participate in “Individual Development Accounts” designed to encourage savings, but no such tax-advantaged plan is available to the general public. The idea has been floated several times in the U.S – President George W. Bush proposed something similar, called Lifetime Savings Accounts, back in 2003 — but the idea has not taken hold.

Remember, spending more than you’re saving — or, worse, earning — could ultimately land you in debt, which can wind up further taxing your bank account and damaging your credit score. You can see how your current debt levels are affecting your credit by viewing two of your credit scores, updated each month, for free on Credit.com. You can also find some tips for getting out of debt here.

Image: Pamela Moore

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Certain credit cards and other financial products mentioned in this and other articles on Credit.com News & Advice may also be offered through Credit.com product pages, and Credit.com will be compensated if our users apply for and ultimately sign up for any of these cards or products. However, this relationship does not result in any preferential editorial treatment.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Our Owners

Credit.com is owned by Progrexion Holdings Inc. which is the owner and administrator of a number of business related to credit and credit repair, including CreditRepair.com, and eFolks. In addition, Progrexion also provides services to Lexington Law Firm as a third party provider. Despite being owned by Progrexion, it is not the role of the Credit.com editorial team to advocate the use of the company’s other services. In articles, reporters may mention credit repair as an option, for example, but we’ll also be sure to note the various alternatives to that service. Furthermore, you may see ads for credit repair services on Credit.com, but the editorial team isn’t responsible for the creation or implementation of those ads, anymore than reporters for the New York Times or Washington Post are responsible for the ads on their sites.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team