WASHINGTON–The average American believes people need approximately $10,000 to cover a financial emergencies, but more than half have just $3,000 or less in their combined checking and savings accounts, according to a new study from the CFPB.
Not surprisingly, the study, “Perceived Financial Preparedness, Saving Habits, and Financial Security,” found most people who are faced with an emergency are “unprepared to weather financial shocks.”
“These feelings of unpreparedness could manifest in lower levels of financial wellbeing and a greater likelihood of consumers feeling that they are not in control of their finances,” the report observes.
The brief report is part of a larger survey conducted by the CFPB, which it regularly conducts and calls “Making Ends Meet,” which seeks to uncover consumers’ savings-related behaviors, experiences, and outcomes. The survey was developed by the CFPB’s Office of Research and is a nationally representative survey of U.S. adults with a credit bureau record, the CFPB said.
According to the Bureau, the difference between what people think they need and what they have in their checking and savings accounts is likely a “lower bound.”
“In particular, we capture the combined amount of money households have in their checking and savings accounts, and, while some money in a checking account could be earmarked for saving, at least some of those funds are likely earmarked for regular bills and other necessities (e.g., rent, utilities, food),” the Bureau said in releasing the findings.
Income Not a Big Driver
The report further found the number of people who report they and their family “need in savings for emergencies and other unexpected things that may come up” goes up with household income, but that the increases are relatively modest.
“The median amount people report they need in savings rises from $5,000 for those in the two lowest income groups (household income of $40,000 or less) to $15,000 for those in the highest income group (household income above $100,000,” the CFPB said it found.
“For many people, the amount they report needing in savings does not align with the amount in their checking and savings accounts, and this misalignment is greatest for people with lower incomes,” the report added.
The full report can be found here.