The state of Americans' emergency savings.

<div class="block">A new linked in survey found that more than 50 percent of respondents are not comfortable with the amount of money they have tucked away for emergencies. Greg McBride, chief financial analyst at Bankrate, joined &#39;Stretching Your Dollar&#39; to talk the state of Americans&#39; emergency savings and how the economy is impacting people&#39;s ability to save. McBride also mapped out a plan to help people begin saving more.</div>

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Stretching Your Dollar: How to Boost Your Emergency Savings

A new report from bankrate found that four and five Americans say they weren't able to increase their emergency savings this year. So here to expand on the findings is been great. Chief Financial analyst, Greg Greg. It's great to have you. What important information did this report reveal about Americans emergency savings? Well, very similar to the poll you just showed there, Kristen that people are behind on their savings. They're not making much progress and in some cases, even falling further behind about a third of Americans actually have less emergency savings now than they did at the beginning of the year. And people recognize the fact, I mean emergency savings has long been the Achilles heel of Americans, personal financial security. People know that but they're not making the progress that they feel they need to make and they expect that what progress they do make is going to take a matter of years, not months. What were some of the reasons Greg that people felt like they weren't able to save this year? One that really kind of stands atop the mountain above all others was inflation a distant second related to that from a cost of living perspective was high household expenses. 57% of respondents pointed to inflation as being a factor that's held them back from adding to their savings. About 38% said that those high household expenses were a contributing factor as well. And so you see, I think a tie in there to the increase in household expenses from inflation and other necessities, other reasons that were, you know, kind of more distant and cited with greater with much less frequency than those two things like two debt rising interest rates, uh an income disruption of some sort, some sort, maybe a job loss or a pay cut, things like that. Um We didn't see those pop up nearly as frequently as as what we saw with people pointing to inflation and just the high cost of living. Did the report reveal anything about when people might be able to reach their savings goals? Yeah, this was pretty sobering but, but at the same time, I also think a fairly realistic assessment on, on the part of people in terms of how long it's gonna take, it's gonna take years, not months. Uh We did find 57% that it was going to take at least a year. Uh 31% said it was going to take one and three years. So that was the most common response. But interestingly too, Kristen, we found that 13% said they would never get back on track with their emergency savings and another 22% said that they didn't know they had no idea how long it was going to take them to get back on track for people watching this segment. They might be wondering Greg, what exactly is an emergency fund? How should people construct that when crafting their own goals? Yeah. Think of this as the money that you can get to in the event of an emergency without penalty, but it's not the same money that you need to pay the bills between now and the next payday. Uh So this is money in your savings account for money market accounts. This is not your retirement money. This is not money that's in the kids' college fund. This is money you can get to at a moment's notice if you need it. And unfortunately, people just don't have enough of it. Let's talk solutions. That's why we have this show to identify the problem and for our experts to give us the solutions given that Americans are not where they feel they need to be when it comes to emergency savings. Greg, how can they get on a path to actually change that? The biggest barrier to saving is not being in the habit. So I think that crucial first step is setting up a direct deposit from your paycheck into a dedicated savings account or an automatic monthly transfer from your checking account to your savings account. Automating this process even at a very dollar amount, really a key first step, you can ramp that up over time, but establishing that habit is critical. And in terms of really moving the needle, you know, oftentimes whether it's paying down debt or boosting savings, it's some combination of cutting expenses or increasing income. Well, in this environment, cutting expense is probably not very feasible. I mean, people have been economizing and trying to wring everything out of their budget that they can for the last 2.5 years because of inflation. But the labor market is still quite strong. And so maybe it's ramping up that side, hustle getting us contract or freelance work for a while, maybe even taking second job, say for a year so that you can really pile the money away into that emergency savings. Get yourself to the point where you do have a greater comfort level and can sleep with that fed at night. Ok. Good to know. Given that the fed has indicated that rates will be higher for longer is now a good time for Americans to consider a high yield savings account if they don't have one already. Yes, absolutely. And really regardless of the right environment, this is where you want to have your emergency savings because you can link it to the checking account that you have at your current bank, you're not gonna change anything about your day to day financial routine. You're not giving up the branch access that you like. Uh, you're, you're just gonna send your savings someplace where it's gonna be welcomed with open arms and higher yields and you can get to it when you need it just by linking that to your checking account. The good news from a rate perspective is, as you noted, interest rates are high and they're going to stay high right now, the top yielding online savings accounts over 5% and they're going to stay that way because we're quite a ways away from the fed beginning to cut interest rates. So that return that 5% plus return is going to look better and better, particularly as we see inflation moderating closer to 2%. Greg great tips. Anything else we should leave our viewers with before we have to wrap this segment? Yeah, you know another way to think about that emergency savings. It's also the buffer between you and high cost debt when unplanned expenses arise. So yes, interest rates are great now from what you're earning on the savings. But even if they're not, it's still the buffer between you and 20% credit card debt when unplanned expenses arise. Greg mcbride, thank you so much for revealing the results of this report and sharing your insight. We appreciate it.