How well do you prepare for the future or unforeseen costs that may come up? Some people put away money for a rainy day, to help out if they should encounter any difficulty such as an unexpected payment or bill. But what may be surprising is that most people do not, according to a recent study.
In a report from Bankrate.com, the firm found that almost six in 10 Americans don’t have enough savings to pay for a $500 car repair or a $1,000 emergency room bill.
While Millennials may be looked down on by older demographics, they are the most equipped generation to pay for an unexpected expense using their savings. It was found that 47% of those within the ages of 18 to 29 responded that they would use their savings to cover such a burden, up from 33% in 2014.
The Silent Generation is the most likely to use a credit card when compared to other generations. In line with this, the reliance on credit cards to finance an unexpected expense has increased overall, a three-year trend dating back to 2014.
Besides the 41% who said in the study that they would use their savings when faced with an unexpected expense, 21% would finance the expense on a credit card, 20% would reduce spending on other things and 11% would borrow from family or friends.
Predictably, savings increases with income and education but almost half of the highest-income households ($75,000+ per year) and college graduates lack enough savings to cover a $500 car repair or $1,000 emergency room visit.
Dining out is the first luxury to go when trying to cut costs, according to the study. About 59% are very or somewhat likely to cut back on restaurant meals this year in order to save money. They are much more hesitant about disconnecting, however, as just 35% are very or somewhat likely to let financial shortcomings affect their cell phone plan, the lowest of the six choices that were offered.
The survey was conducted by Princeton Survey Research Associates International, which used a nationally representative sample of 1,003 adults living in the continental United States.