| April 29, 2016

Research of the Week: Where’s Your Rainy Day Fund?

Nearly 30% of American families has nothing saved for emergencies.

Each week, Consolidated Credit searches for financial research that can help you deal with your debt and budget. This week…

The interesting study

Emergency savings is essential for maintaining financial stability. Otherwise you’re just living paycheck to paycheck and one unexpected expense or medical emergency can send your finances into a tailspin.

So today we’re looking at rainy day saving statistics from the 3rd Annual Nationwide Financial Capability Survey from NeighborWorks America.

The big result

Encouragingly the survey finds 71% of American households have set up at least some kind of emergency savings fund to help face financial challenges as they arise. Even better news, the trend in rainy day savings is positive – 71% is up from the 63% of Americans who reported having a rainy day fund last year. Unfortunately, that leaves almost 30% of households with no means for handling emergencies.

The fascinating details

The really interesting part comes where the survey breaks rainy day savers and non-savers down demographically:

  • Only 68% of women have a rainy day fund, compared to 75% of men
  • Not surprisingly, it seems easier to create the fund if you have more income:
    • 91% of workers who make $100,000 or more have emergency savings
    • 63% of workers who make less than $40,000 have a fund
    • Only 39% of workers making less than $20,000 have one
  • Homeowners are more likely to save than renters at the same income level:
    • 84% of homeowners who make $40,000-$59,000 save, compared to 58% of renters who make the same amount
    • 97% of homeowners earning over $100,000 save, but oddly only 67% of high-income earning renters use a rainy day fund

The survey also broke down rainy day funds demographically based on how much money people actually have saved up:

  • Women average $20,434 in emergency savings, which is half of what men save at $41,230
  • By ethnicity…
    • African American families have the lowest average savings of only $5,447
    • Caucasians are at the high end at $34,279 average savings
    • Asians have $19,329 saved on average,
    • While $16,057 is the average savings for Hispanic families
  • If you have student loan debt, your savings is likely to be lower, too:
    • Those who are currently paying off student loans only have $12,731 saved on average
    • Those who already paid their student loans off average $31,639 in savings
    • Those who never had student loan debt have a slightly higher average at $37,582

What you can do

Regardless of your age, gender, ethnicity OR income level you need some type of emergency savings.

Emergency should basically be relative to how much you make. So if you have lower income you still need a rainy day fund, but your day-to-day lifestyle generally costs less so you can have less saved than someone who makes $100,000 or more.

In general, experts recommend that you should have about 3-6 months-worth of budgeted expenses saved up in emergency savings. This is money that’s easily accessible and not tied up in investments – money you keep in a basic savings or Money Market Account (MMA).

So let’s do the math…

  • According the Bureau of Labor Statistics, the average American family spends $53,495 per year.
  • That means they spend about $4,458 per month.
  • So the average family should have between $13,373 and $26,747 saved in their emergency fund.

Keep in mind that the average family according to the BLS makes $66,877. So if you make less, you’re probably spending less each month, too. So look at your budget and see how much you spend on bills and necessary expenses like gas and groceries. Multiply that total by 3 and then 6 to get your savings range.

Now, we’re not going to sugarcoat things – it can be really tough to save that much AND then avoid spending it. Many times families will spend their emergency fund for something like a down payment on a car or home. But that leaves them without an emergency fund following that purchase.

Just at a basic level, you at least want $1,000 in savings to cover a big bill or unexpected expense. Once you hit that milestone, you just don’t stop. You keep saving until you have enough funds that you at least feel comfortable that you’re not living paycheck to paycheck and that you can weather a financial crisis if one comes up.

You can learn more about making a rainy day fund through my blog post on Consolidated Credit’s personal finance blog, Miss Money Bee. And keep in mind that one of the biggest obstacles to saving is high monthly debt payments. If debt, particularly high-interest credit card debt is eating away at your income and leaving nothing for you to save, we can help. Call Consolidated Credit today at or complete an online application to request a free debt and budget analysis from a certified credit counselor.

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