CST: 25/05/2016 04:05:31   

More Americans Are Saving for a Financial Emergency, but Nearly One-Third of Adults Lack a Rainy Day Fund

57 Days ago

Demographic Breakdown Shows Women Are Significantly Less Prepared Than Men

WASHINGTON, DC --(Marketwired - March 28, 2016) - More Americans are putting money aside for an emergency than one year ago, but nearly 30 percent of adults still have no rainy day fund, according to the third annual nationwide financial capability survey released today by NeighborWorks America. The survey found that 71 percent of Americans say they have an emergency fund to help weather a sudden financial crisis, up from 63 percent one year ago.

NeighborWorks released the survey results today to mark the beginning of National Financial Capability Month, and to call attention to the fragility of many families' finances, despite the growing economy and the lowest unemployment rate in nearly a decade.

Women differ significantly from men in financial preparedness, with 68 percent reported having an emergency savings fund, compared to 75 percent of men. Moreover, when asked how confident they were in their ability to withstand an unexpected financial emergency, eight out of ten men felt confident, compared to 64 percent of women.

An improving economy has helped the overall number of households to set aside money in case of emergency, but in general, those with a higher-income are much more prepared to do so. The survey found 91 percent of adults with income above $100,000 said they have emergency savings, compared to 63 percent of adults with income below $40,000, and just 39 percent of people with annual income less than $20,000.

There also is a significant difference in emergency savings capacity between homeowners and renters. The survey found that 84 percent of homeowners with income between $40,000 and $59,000 had money saved in case of emergency, compared to 58 percent of renters with the same income. Interestingly, a similar divergence in savings occurs at the higher income level, with 97% of homeowners with income of $100K or higher reporting that they have emergency savings, compared to only 67% of renters in the same income range.

Here are selected demographic data on access to money in case of emergency. It's not clear from the survey if these data reflect access to very liquid sources of funds such as checking and savings accounts, or if respondents considered retirement savings a source of emergency cash.

  • Women on average report half as much money available in an emergency than men, $20,434 versus $41,230.
  • African-Americans had the lowest amount of money in emergency savings, with immediate access to only $5,447. This was compared to $34,279 for whites, $19,329 for Asians, and $16,057 for Hispanics.
  • Those Americans with current student loan debt had access to the least amount in emergency savings ($12,731 versus $31,639 for those who had student loan debt but paid it off, and $37,582 for those who never had student loan debt).

"These findings highlight an alarming trend -one-third to two-thirds of people with moderate and low incomes are not financially prepared for an emergency," said Paul Weech, NeighborWorks America president and CEO. "Moreover, the difference between ethnic groups and genders is cause for concern. Just half of African-Americans and 62 percent of Hispanics report having an emergency fund in our survey, compared with 78 percent of Whites and 72 percent of Asians."

The economic recovery is broadly moving forward, but these survey data show that millions of Americans could be struggling financially. That is why the absence of any emergency savings for nearly one-third of adults, and the short life span of the funds that are set aside, is particularly worrisome. Forty-five percent of adults surveyed said that they could manage a financial setback of just 12 weeks or less. However, according to February 2016 data from the Bureau of Labor Statistics, the average unemployed person was out of work for 29 weeks, more than twice as long as people say that the money they've saved would last.

"The big picture is definitely improving, but we see from this survey that not too deeply below the surface the finances of many Americans need shoring up," said Weech. "NeighborWorks has redoubled our efforts to expand economic opportunity in 2016 by convening business, government, academic and nonprofit leaders to identify and deploy solutions that will build the financial capability of more Americans."

*The telephone survey was conducted of a nationally representative sample of 1,000 U.S. adults. The survey has a total cumulative sampling error of +/- 3.1% at the 95% confidence level. Conducted by Finn Partners, March 10-14, 2016.

About NeighborWorks America

For more than 35 years, NeighborWorks America, a national, nonpartisan nonprofit, has created opportunities for people to improve their lives and strengthen their communities by providing access to homeownership and to safe and affordable rental housing. In the last five years, NeighborWorks organizations have generated more than $24.5 billion in reinvestment in these communities. NeighborWorks America is the nation's leading trainer of community development and affordable housing professionals.

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Contact:
Douglas Robinson
202-760-4062
drobinson@nw.org