Only 51% of Americans Have More Emergency Savings Than Credit Card Debt
NEW YORK ( MainStreet) One out of three Americans still do not have enough money socked away to pay for emergencies that crop up like an unexpected car repair or illness.
Instead, many consumers are paying for their emergencies by using their credit cards, which means that they not be able to afford the interest, late charges and over the limit fees which can result from adding an unplanned expense to their existing debt load.
Only 66% of Americans have sufficient emergency funds for unexpected expenses like car repairs or a doctor's visit, according to America Saves, an annual opportunity for organizations to promote good savings behavior and a chance for individuals to assess their own saving status, which runs from Feb. 24 to March 1.
"The importance of saving cannot be over-emphasized, as saving is one of the critical building blocks to financial success," said Gail Cunningham, spokesperson for the National Foundation for Credit Counseling (NFCC), a national nonprofit financial counseling organization. "Financial stability cannot exist without a healthy savings account."
The survey also found that only 54% of Americans say they have a savings plan with specific goals while only 43% of Americans say they have a spending plan that allows them to save enough money to achieve the goals of their savings plan.
A more alarming statistic reveals that 31% of consumers have zero non-retirement savings, according to a recent NFCC's financial literacy survey.
"Americans with no money socked away for the inevitable rainy day are on a slippery slope," she said. "When money is tight, it's difficult to think about saving. However, that is when an unplanned expense can be most devastating financially. The America Saves campaign provides consumers with the tools through which they can begin to build a financial safety net."
While our economy is based largely on consumer spending, more people need to save for retirement, said Larry Rosenthal, a retirement coach for ING.
"If we have another good year in the market, we will see the wealth effect and people will buy more items," he said. "If people chose to spend, it helps the economy, but it hurts them. It is very important that we start to save money as a nation."
One way to save additional money is to temporarily suspend some discretionary spending from your lifestyle needs such as going out to eat, Rosenthal said.
"Don't mortgage everything," he said. "It needs to be paramount in people's mind that they need to save for retirement. People need to make sure they are saving money and getting compound returns."
Only 51% of Americans have more emergency savings than credit card debt, according to a new Bankrate.com report. The survey also found that 28% have more credit card debt than emergency savings, the highest percentage in the past four years while 17% have neither emergency savings nor credit card debt.