Emergency savings are tumbling during pandemic, especially in households with income under $50,000

  • Of households with income below $50,000, about 44% say their savings has dropped, compared with 27% of those earning above that amount, a Bankrate survey shows.
  • By age group, the highest rate of no cash cushion is among people ages 56 to 65.

An already troubled aspect of Americans' financial life appears to be deteriorating.

While roughly 13% of U.S. adults say they have more emergency savings now than they did pre-pandemic, roughly 35% report having less, according to a Bankrate study.

Households with income below $50,000 yearly are feeling the Covid-induced economic meltdown the most, with 44% saying their savings has dropped, compared with 27% of those earning above that. By age group, younger baby boomers — those ages 56 to 65 — are in the weakest position, with 26% saying they have no emergency funds.

Emergency savings during pandemic

"The pandemic, the widespread unemployment — that's been a shock and unforeseen development for everyone," said Greg McBride, chief financial analyst at Bankrate.

Roughly 1,000 adults were polled in late July for the survey, just as the $600 in extra weekly unemployment benefits from the federal government was coming to an end. The survey echoes other recent findings that suggest many households are struggling in the face of high unemployment as the pandemic continues to wallop the U.S. economy.

On Thursday, the Labor Department said new jobless claims were above 1 million for the week that ended Aug. 15. More than 28 million individuals were collecting unemployment heading into this month. 

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"Even beyond the 28 million people receiving some form of unemployment, about half of households have taken a hit during the pandemic and, in many cases, it's their savings that's filling the void," McBride said.

With the unemployment rate above 10% and economic uncertainty persisting, congressional lawmakers have yet to reach agreement over how best to help struggling households and businesses, as well as states and local governments.

And although President Trump issued an executive order Aug. 9 to get an extra $300 a week to unemployed people, only a handful of states have signed up to participate so far.

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There was a bright spot in the Bankrate survey: the share of respondents with no emergency savings (21%) is lower than it's been in past surveys. However, McBride expects that bump to be fleeting.

"I think we'll see that increase because the environment of unemployment and prolonged underemployment will continue to drain the savings that many households have," McBride said. "Savings that people could put away earlier this year could be what they're leaning on later this year if their income declines."

If you remain employed, it's worth focusing on bulking up your cash reserves, McBride said. Most experts recommend having at least three or six months worth of a cushion, if not more.

"If you're still working full-time, make hay while the sun shines," McBride said.

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