Finance Expert: Almost Half Of Americans Don’t Have $1000 For Emergencies But We’re Not Wired To Save

Finance Expert: Almost Half Of Americans Don’t Have $1000 For Emergencies But We’re Not Wired To Save

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Photo by Joslyn Pickens

A recent Bankrate survey reveals 44 percent of Americans can’t cover a $1,000 emergency expense from savings, pointing to inherent challenges in saving habits. Behavioral finance expert Brad Klontz attributes this to human instincts prioritizing immediate needs over saving, suggesting emotional reframing to encourage saving habits.

“We’re just not wired to save,” Klontz, a certified financial planner and expert in financial psychology and behavioral finance, told CNBC. Instead, we are programmed to focus on our immediate needs.

Saving “goes against our natural instincts,” stressed Klontz, who is a member of the CNBC Financial Advisor Council.

Inflation concerns also impact savings, with 63 percent citing it as a barrier. Rising interest rates, although beneficial for some, aren’t universally driving savings growth. Moreover, job loss fears loom large, with 42 percent of respondents “very worried” about covering immediate living expenses for just a month.

Mark Hamrick, a senior economic analyst at Bankrate, stressed the need for optimism, emphasizing the importance of prioritizing emergency savings amid economic uncertainties. The survey, conducted with over 1,000 adults, highlights the pervasive financial fragility in American society, calling for proactive measures to build financial resilience.

“Inflation has been a key culprit standing in the way of further progress on the savings front,” Hamrick told The Hill. “Fortunately, rising interest rates have also provided more generous returns on savings.”

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In the face of these challenges, experts advocate for adjusting spending habits, saving first, and reframing savings goals to evoke emotional responses, thereby motivating action towards building emergency funds. While ingrained tendencies may hinder saving behaviors, strategic interventions and a shift in mindset can pave the way for improved financial security.

But many Americans have opted instead to go deeper in debt by tapping their credit cards, borrowing money from friends or family, or taking out a personal loan.

“There’s a persistence of fragility in American society,” said Hamrick, senior economic analyst at Bankrate. “There’s more financial fragility out there than I think is widely understood.”

Photo by Joslyn Pickens: https://www.pexels.com/photo/person-putting-coin-in-a-piggy-bank-3833052/