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As record high inflation persists in the US, Americans are feeling a new side effect — in security around their emergency savings, according to a new survey from Bankrate.com.
The percentage of people who are uncomfortable with the amount of money they have set aside is now 58%, up from 44% two years ago, the June survey found.
Meanwhile, people who say they are comfortable with their emergency savings is now 42%, down from 54% two years ago.
Yet there are signs people may have more money set aside now than in years past.
The poll found 23% of respondents have no emergency savings at all, down from 25% last year. That is among the lowest levels in 12 years of polling by the personal finance website.
At the same time, 27% of households have enough emergency savings to cover six months or more of expenses, up from 25% in the past two years. That is the highest it’s been since 2018.
“Despite having more savings, comfort level is way down,” said Greg McBride, chief financial analyst at Bankrate.com. “Inflation being at four-decade highs will erode your comfort level in the buying power of your emergency savings.”
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The survey was conducted online and by phone between June 3 and June 5. It included 1,025 respondents.
Another reason people may feel less secure with their emergency cash is they may have less of it compared to a year ago.
About 34% of survey respondents had less in emergency savings than they had a year ago, while less than 24% of people said they have more.
“With inflation running as high as it is … that’s an indicator that excess savings is being relied upon in a time of inflation outpacing wage gains,” McBride said.
Admittedly, it can be difficult to find extra money to set aside when prices are higher everywhere.
How to improve your savings
One possible solution is to pay yourself first, if you do have the wiggle room to save money.
“It’s best to just lop that savings right off the top before you even see it and then build the budget around what’s left,” McBride said.
“It’s really tough to go at it the other way in this environment because costs are increasing so fast,” he said.
One bright spot to savings now is that as interest rates rise, savers stand to get a better return on their money.
Many households with savings have that money in accounts earning just 0.01%, McBride said. Now, online savings accounts are paying upwards of 1.5%, which is rising by the day, he said.
“There’s an immediate 150-fold increase in interest earnings while still preserving access to the money and the protection of federal deposit insurance,” McBride said.