Got Debt? The Sorry State of Emergency Funds in America

Source: Thinkstock

Source: Thinkstock

What does it mean to save money? In simple terms, saving means spending less than you earn. It’s about finding a balance between your wants and needs in order to provide a margin of safety for life’s little surprises. Unfortunately, many Americans are having a difficult time accumulating savings in the wake of too much debt.

Three out of eight Americans are teetering on the edge of financial disaster, according to a new report from The company finds that 24% of consumers have more credit card debt than emergency savings, and another 13% have neither credit card debt or emergency savings. Overall, only 58% of Americans have more emergency savings than credit card debt. However, that figure is up from just 51% last year and 55% in 2013. People between the ages of 30 and 49 are in the worst financial shape, most likely due to the expenses associated with raising a family or paying a mortgage.

Building an emergency fund early in life helps protect you against unexpected expenses and unforeseen events such as a job loss. It can also help you stay away from relying on credit cards when disaster strikes, which appears to be a sore spot in the budget. The Federal Reserve reports that Americans added $17 billion in credit card debt in the fourth quarter of 2014, compared to the prior year. In fact, Americans now owe a total of $700 billion to credit card companies.

Savings may also help you avoid relying on someone else for financial help. In a separate report from, 16% of Americans say they will borrow money from family and friends to cover an unexpected bill, such as a $500 car repair or a $1,000 emergency room visit. Twelve percent say they will use credit cards to fill the gap, potentially leading to even bigger problems down the road.

“A solid majority of Americans say they have a household budget, which is a good thing. But too few have the ability to cover expenses outside their budget without going into debt or turning to family and friends for help,” said Claes Bell, a analyst, in a press release. “Also, with so many good budgeting apps, websites, and computer programs out there, those relying on analog budgeting methods such as paper and pen, or simply keeping track of expenses in their head, could be missing an opportunity to make their budgeting easier and more effective.”

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