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Most Americans are still struggling to build solid savings accounts nearly two years into the coronavirus pandemic.
According to a phone survey of more than 1,000 adults conducted by Bankrate in early January, about 56% of Americans are unable to meet an unexpected $1,000 bill with savings.
"Emergency savings and the $1,000 mark is really an indication of how much people are struggling to be so close to the brink financially," said Greg McBride, senior vice president and chief financial analyst at Bankrate.
Instead of drawing on their emergency reserves, many Americans would have to borrow to pay an unexpected $1,000 bill, either by asking family and friends for a loan, taking out a personal loan from a bank, or charging a credit card.
barriers to savings
According to Bankrate, the 44% of Americans who could use their savings to cover a $1,000 emergency expense is the highest percentage in eight years.
Additionally, some adults do better than others when it comes to building and maintaining solid savings for emergencies. Almost 60% of those with college degrees could cover expenses of $1,000, as could more than half of those earning $50,000 or more a year.
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But rising costs are also making it difficult for Americans to save. Inflation rose 7% last year, the fastest pace in 40 years, according to the December release of the US Bureau of Labor Statistics CPI. Almost all expenses measured by the index rose in December, with housing, used autos and trucks, energy and food prices boosting the metric the most.
According to Bankrate, nearly half of Americans said higher costs keep them from saving more.
"Almost all household expenses have increased," said Tania Brown, a Lawrenceville, Georgia-based certified financial planner and founder of FinanciallyConfidentMom.com. Additionally, she added, parents may have particular problems when their children are in and out of school due to Covid, affecting not only the budget but how much some can work each week.
Here's how to build savings this year
For people who want to keep saving or start building an emergency fund now, that likely means they need some creative budgeting, Brown said.
"To me, the most important factor in finance is behavior," she said, adding that if you could change your spending habits it would help you save.
That could mean cutting cable and streaming platform subscriptions or choosing to buy less meat from the grocery store to save money. People could also sell clothes they no longer want to wear and make changes to their homes to save on energy bills.
It might also be time for people to diligently shop for deals and use coupons to keep costs down, or even commit to a no-spend period, Brown explained.
"For the non-essential stuff, cut mercilessly," she said.
Once you've made cuts, you should also be aware of where the extra money is going. Make sure you send every dollar you find to an emergency savings fund or to pay off debt, Brown said.
"Your lifestyle just can't keep up with the changes," she said. "There has to be almost an obsession, a compulsion to prioritize saving and a serious intention about where to spend."
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