Less than half of U.S. households have enough savings or steady cash flow to cover a $1,000 emergency expense, according to a new Bankrate report.
And nearly 30% of households carry more credit card debt than they have in emergency savings.
“We definitely see a lot of people are getting squeezed by inflation, higher interest rates,” Bankrate Principal Analyst Ted Rossman said.
Just 47% of people told Bankrate they could handle a $1,000 surprise expense.
Bankrate has run annual surveys on emergency savings for years, and this year’s findings suggest it’s becoming harder for many Americans to set money aside for a rainy day.
A change in the survey this year makes it difficult to compare results directly with past years.
Still, Rossman said the everyday reality is clear.
“I would say sort of more anecdotally, from more of a consumer standpoint, that yes, people are definitely finding it hard to save,” he said. “The personal saving rate has dipped significantly. It wasn’t too long ago that was above 7%, and now it’s around (3.5%). We’re definitely seeing a rising cost of living causing people to dip into savings, take on debt.”
This year’s survey found that 29% of people have more credit card debt than emergency savings, 44% have more savings than credit card debt, 19% have neither, and the remaining respondents said they don’t know.
Even households without credit card debt can be exposed, Rossman noted, because having little or no emergency fund means the next unexpected cost can quickly become a crisis.
Should You Pay Down Credit Cards or Build Savings First?
For families who lack an emergency fund and also carry credit card debt, the pressure can feel like a tug-of-war: pay down debt or build savings?
Rossman’s answer: do both—at the same time.
“The reason that it’s so important is because it really is two sides of that same coin, where if you don’t have enough savings, the next unexpected expense is going to land on a credit card,” he said, “and then that’s going to start the cycle over again.”
With the average credit card rate just under 20%, he said that cycle can become incredibly expensive.
That’s still very high, Rossman warned.
He added that someone making only minimum payments at that average rate—carrying an average balance of around $6,500—could remain in debt for 18 years and pay more than $9,000 in interest.
At the same time, draining savings to pay down debt can leave a household unprotected when a car breaks down or an emergency room bill hits.
Start Small and Build Momentum
Financial experts often recommend building enough savings to cover six months of expenses, Rossman said. But for many people living paycheck to paycheck, that goal can feel out of reach.
So start with smaller milestones.
Break savings goals into manageable segments. And don’t let a six-month target discourage you—even $500 or $1,000 can provide meaningful breathing room in a pinch.
Rossman suggested using a high-yield savings account and setting up automatic transfers on payday. Some of the best savings rates are over 4%.
He also emphasized that emergency savings should be kept somewhere liquid—like a checking or savings account—rather than in stocks or other investments where accessing the money could be slow or complicated.
Make Saving Automatic, Not Optional
The real key, Rossman said, is turning saving into a habit—something you do consistently, not only when there’s extra money left over.
He urged people to save “off the top,” right when income arrives.
“When that paycheck hits your checking account, have an automatic transfer go into this external savings account,” he said. “There’s really two benefits to that. One is you’re automating the process, so you don’t need to remember to do it every time. The other thing is out of sight, out of mind. Sometimes, if it takes you a day or two to access the money in one of these online savings accounts, sometimes that arm’s length is a good thing. It prevents you from tapping into it when it’s not necessary.”
