Just got hit with a hefty medical or car repair bill and aren't sure how you're going to swing it? You're in good company, according to a new survey from Bankrate, which reveals that most Americans are woefully unprepared for a crisis, reports USA Today. The financial analysis site's yearly emergency savings report, which surveyed 1,000 adults in mid-December, notes that just 44% of Americans have $1,000 on hand for such emergencies, a number that's held relatively steady for three years straight. As of May, 22% of respondents claimed no emergency savings at all.
For those who don't have savings on hand for that sudden $1,000 bill, 21% say they'd have to put it on a credit card; 16% say they'd need to cut back on other things to scrounge up the money; 10% say they'd hit up family or friends; and 4% say they'd have to resort to taking out a loan. The credit card option is especially worrisome, notes Bankrate economic analyst Mark Hamrick. "Interest rates charged on credit card debt, recently averaging nearly 21%, are the highest we've seen," he says in a release. "Yet 21% of Americans would use a credit card and pay it off over time when facing a sudden, unforeseen expense. That risks putting them even farther behind on their financial goals."
Contributing factors that have kept people from bulking up their savings account include high inflation, according to 63% of respondents; high interest rates (45%); and a switch in jobs or income (41%). "All too many Americans continue to walk on thin ice, financially speaking," Hamrick says. Certified financial planner and financial psychologist Brad Klontz suggests this dilemma may not be our fault. "We're just not wired to save," he tells CNBC, explaining that human brains are designed to concentrate on the fires in front of us, not future ones.
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There are ways to make inroads if you're cash poor. Klontz suggests motivating yourself by imagining the worst-case scenario (for example, a job loss), then doing the "painful exercise" of figuring out how to spend less and save more. He also recommends the psychological trick of naming your emergency account something inspiring, such as "Financial Security Fund" or "Financial Freedom Fund." "We dodged the proverbial bullet as an often-predicted recession did not yet materialize during the last couple of years," Hamrick says in the Bankrate release. "Now is the time to prepare for the unexpected." (More emergency savings stories.)
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