Americans need urgent savings amid ‘dangerous scenario’


Suze Orman speaks during AOL’s BUILD Speaker Series at AOL Studios in New York City.

Jenny Anderson | WireImage | Getty Images

An unexpected bill is never convenient.

But now there are even more reasons why an unexpected event — such as a car repair or medical expense — can put Americans in a precarious financial position.

Blame record high inflation, which has hit 40-year highs and driven up prices of everything, including grocery store staples like butter, lettuce and dairy.

There are also risks of recession towards 2023. The question is that leading tech employers like Amazon and Google have already started cutting jobs.

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Meanwhile, the federal government has reached its debt ceiling. It is now up to lawmakers to find a solution so that the US government can continue to pay its debts.

“We have a financial pandemic right now,” personal finance expert Suze Orman told CNBC.com.

“It’s a much more dangerous scenario than it was during the pandemic,” Orman said of the current financial risks facing Americans.

Many Americans were able to set aside more money than usual during the Covid-19 pandemic, as government aid meant longer unemployment benefits for unemployed Americans, and millions of individuals and families received stimulus checks.

Those federal funds are now dwindling, Orman said, and bills are starting to arrive, including in some cases tripling rents and mortgage interest rates that are higher than before the pandemic.

The environment could be the wake-up call many Americans need, he said.

“You should have an emergency savings account, no matter where you’re at,” Orman said.

Americans live paycheck to paycheck

There’s never been a better time to set aside some emergency cash.

However, for many Americans, putting away significant amounts of money remains a challenge.

According to SecureSave, a financial technology company that aims to help workers set aside emergency savings through their employers, a new survey shows that 74% of Americans live paycheck to paycheck.

More than half of respondents — 54% — have reduced their savings in the past year, as inflation has risen, according to SecureSave’s November online survey of more than 1,000 U.S. adults.

About 67% of workers cannot afford $400 in emergency expenses.

Among the things Americans most regret about their personal finances is not saving for emergencies.

Mark Hamrick

Senior Economic Analyst at Bankrate.com

Orman said he co-founded SecureSave during the pandemic after telling people they should have a savings account for 40 years.

“Our goal was very simple: see if we could change the savings rate in America for people who have never saved a dime,” Orman said.

Often people fail to achieve this goal. A new Bankrate.com survey finds that a majority of adults — 57% — can’t afford an emergency $1,000 expense.

“People can’t do it alone,” Orman said. “The main thing is not to see it in your paycheck.”

Through SecureSave, employees can automatically have as much as $25 in savings from their paychecks and then receive a $3 or $5 match from their employer.

At the end of the year, Orman says, people are surprised at how much they’ve saved, whether it’s $600 or $1,000.

“They love it,” he said. “And most of the time, they’ll get a raise.

“When you start to see how easy it is to save, the more you love to save,” Orman said.

By increasing your cash on hand, you can avoid applying for credit cards as interest rates rise.

To this point, 25% of consumers surveyed by Bankrate.com said they would incur an unexpected expense of $1,000 or more and pay it off over time.

Mark Hamrick, chief economic analyst at Bankrate.com, notes that this strategy will become more expensive with new credit card offers with interest rates of almost 20% even for the best qualified.

How savings can help other financial goals

Guido Mieth | DigitalVision | Getty Images

According to Orman, setting up an emergency fund with an employer is the first hurdle to financial well-being.

The next goal is to keep eight to 12 months’ worth of expenses in a separate savings account, Orman said.

Even cash-strapped employees should contribute enough to their retirement accounts, if any, up to employer matching.

“You can’t pass money around for free,” Orman said.

As employees reduce their own financial stress, it can also help employers. According to SecureSave, almost 30% of workers say they worry about money for an hour or two a day.

According to Bankrate.com’s Hamrick, this can help prevent regrets later.

“We’ve historically found that among the things Americans regret most about their personal finances is not saving for emergencies,” Hamrick said. “The other is not saving for retirement.”



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