Inflation worries US households over emergency cuts

As record inflation pushed consumer prices up, some U.S. households are uneasy about their emergency savings, a new survey finds.

More than half of the 1,025 adults (58%) surveyed by Bankrate between June 3 and 5, 2022, said they were concerned about the amount they have in emergency savings, up from 48% in 2021 and 44% in 2020. Of those who were uncomfortable with their emergency fund, 75% had no savings or not enough to cover at least three months’ worth of living expenses. Only 43% of those who felt very uncomfortable have no savings at all.

Of the 42% of respondents who are very or somewhat comfortable with what they have saved, 82% had saved at least three months in costs.

Of households earning more than $100,000, more than half (59%) were somewhat or very comfortable with their emergency savings, while less than half (46%) of those earning $50,000 to $99,999 reported being comfortable with their emergency money. Of households earning less than $50,000 annually, 37% had no savings at all.

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As record high inflation has pushed consumer prices up, many U.S. households are uneasy about their emergency savings, according to a new survey. (iStock/iStock)

Only 38% of millennials (ages 26-41) were somewhat or very comfortable with their emergency savings, compared with 41% percent of Generation X (ages 42-57) and 49% of baby boomers (ages 58-76).

Only 24% of adults surveyed by Bankrate said they have more money in an emergency fund than they did a year ago. In comparison, 32% said they saved the same amount, 34% said they saved less, and 10% said they had no savings then or now.

Just over a quarter (27%) of households surveyed had enough savings to cover at least six months’ worth of expenses — a 25% increase over the past two years. Meanwhile, 22% of households surveyed had saved enough to cover three to five months’ worth of expenses – the highest percentage since 2011. Overall, 28% of households had some savings, but not enough to cover three months’ worth of expenses.

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In May, the consumer price index – a broad measure of the price of everyday goods, including gasoline, groceries and rent – rose 8.6% from a year ago.

Last week, the Federal Reserve raised its benchmark rate by 75 basis points for the first time in nearly three decades. The move places the key benchmark for federal funds at a range of 1.50% to 1.75%, the highest since the pandemic began two years ago.

Officials have also charted an aggressive path of rate hikes for the remainder of the year. New economic projections released after the Fed’s two-day meeting showed that policymakers expect interest rates to reach 3.4% by the end of 2022, which would be the highest level since 2008.

Fed Chair Jerome Powell told reporters at a news conference after the meeting that an increase of 75 basis points, or 50 basis points, is still on the table for the July meeting.

Jerome Powell

Federal Reserve Chairman Jerome Powell speaks to the Senate Committee on Banking, Housing and Urban Affairs as he presents the monetary policy report to the committee on Capitol Hill, Wednesday, June 22, 2022, in Washington. (AP Photo/Manuel Balce Ceneta / AP Newsroom)

While the Fed aims to orchestrate a soft landing — the sweet spot between taming consumer demand and inflation without crushing economic growth — Powell told the Senate Banking Committee in testimony on Wednesday that it will be “very challenging.”

Goldman Sachs, Bank of America and Deutsche Bank have all raised the odds of a downturn in 2022 or 2023, and Powell has admitted there is a real possibility of a recession. More than 60% of executives expect a recession in the next 12 to 18 monthsaccording to a survey of CEOs and other C-suite executives conducted by the Conference Board, a business research firm.

Megan Henney of FOX Business contributed to this report

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