It is becoming increasingly difficult for Americans to put money aside.
According to a new survey, 81 percent of adults said they did not contribute to emergency savings this year, largely due to high inflation and rising interest rates, and 60 percent said they felt behind on building cash support. Bank rate report.
“Rising prices and higher household spending have been the key obstacles to increasing emergency savings,” said Greg McBride, chief financial analyst at Bankrate.
“When expenses increase faster than incomes, this puts households in a difficult situation.”
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According to finance and economics professor Sung Won Sohn, so far most Americans have benefited from several government-provided safety nets, most notably a massive injection of stimulus money; This left many households facing cash stockpiles after 2020. Chief economist at Loyola Marymount University and SS Economics.
But this cash reserve has now been largely depleted after consumers gradually spent their excess savings from the Covid years.
“I’m starting to worry going forward because savings are running out,” he said.
Rising inflation after the epidemic made our livelihood difficult. At the same time, the Federal Reserve’s most aggressive rate-hiking cycle in four decades has made borrowing more costly.
How to start building an emergency fund?
A customer shops at a Costco store in San Francisco on October 2, 2023.
Justin Sullivan | Getty Images
Most financial experts recommend setting aside at least three to six months of expenses or more if you’re the sole breadwinner for your family or are in business for yourself.
To improve your cash cushion, “you have to do what works for you,” McBride said.
“Given the rise in prices of basic necessities such as housing, food and energy over the past few years, it may not be possible to meaningfully reduce household spending.”
Instead, “consider taking advantage of the tight labor market with a side gig, freelance or contract work, or even take on a second job for a while to make progress on increasing savings,” McBride said.
