Just over half of Americans have more emergency savings than credit card debt, according to a new Bankrate.com survey released Monday. This is a slight improvement over the last two years, when 54 and 52 percent, respectively has more emergency savings than credit card debt.
?The proportion of people with more emergency savings than credit card debt hasn't changed much," said Greg McBride , CFA, Bankrate.com's senior financial analyst, in a statement. "Given the poll's 3.5 percent ?margin of error, one can make the argument that consumers haven't moved the needle at all over the past 24 months."
A recent Corporation for Economic Development report similarly found that nearly half of American households (43.9 percent) are lacking a rainy day fund, a personal safety net to prepare for emergencies or future needs. The equivalent of 132 million people are considered ?liquid asset poor,? meaning they lack the savings to cover basic expenses for three months if a family member lost their job or suffered a medical emergency or other crisis that would lead to a loss of steady income.
The prolonged economic downturn has made it challenging for many households to start or maintain an emergency fund. save during the prolonged economic downturn. Many families feel forced to dip into their rainy day, or even retirement savings, to meet daily expenses.
The difficult of establishing an emergency fund is reflected in Bankrate?s Financial Security Index, which dropped to 96.8 in February from 98.6 last month. A reading of 100 means consumers' feelings of financial security are unchanged from one year ago; the index has been below 100 ? a sign of deteriorating financial security ? in 25 of the 27 months since its inception.
Among the components that comprise the index, net worth was the only one to show improvement from January to February. Bankrate attributed this to rebounding home prices and the surging stock market. Job security, savings, debt and overall financial situation each declined in February. When consumers were asked whether they are feeling better, worse or about the same now versus one year ago, net worth was also the only component to register in positive territory. Among the highest-income households (income of $75,000 per year or more), all five components declined over the past month.
Because of low interest rates, traditional savings and money market accounts offer meager yield rates, but they do provide investors with easy accesss to their cash in case of an emergency.
Experts recommend several strategies for building an emergency savings fund, among them, using automatic account transfers to earmark a reasonable amount from each paycheck to savings; planning ahead to budget for fun activities, imposing a 24-hour embargo on impulse purchases, and using cash instead of credit cards .
Source: http://www.millionairecorner.com/article/wealth-management-strategies-building-emergency-fund
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