Americans Kick Off 2025 With Little Emergency Savings

Inflation has chipped away at Americans’ cost of living. The enormous spike in prices and erosion of consumers’ purchasing power have disadvantaged millions. They have been forced to cut back on their savings, forgo retirement plans, and depend on credit cards for day-to-day expenses or unforeseen circumstances. Unfortunately, according to a new study, many Americans have started 2025 with little emergency savings. This could be a persistent challenge until wages outpace inflation and households play a game of catch-up.

Raining on the Emergency Savings Parade

Bankrate published new data from its annual Emergency Savings Report, a survey of more than 1,000 US adults. Researchers concluded that 41% would rely on their savings to cover an emergency expense, such as a visit to the ER or a car repair. Another 43% would borrow the funds to pay for the emergency, including 25% who would use a credit card. Lastly, 27% of survey participants have no emergency savings, the highest percentage since 2020.

While price inflation is not accelerating as it did in 2022, 73% of consumers still accept that elevated inflation is affecting their savings. Others are blaming rising interest rates and changes in income or employment.

This situation is causing anxiety in a majority of Americans, as two-in-three worry they would be unable to cover living expenses if they lost their job. The most affected, the research shows, is Generation Z. In the end, more than half (69%) say they are uncomfortable with the state of their emergency savings. As a result, says Mark Hamrick, the senior economist at Bankrate, the United States has morphed into a “paycheck-to-paycheck nation."

"Fewer Americans have the equivalent of a financial safety net to cover inevitable unexpected expenses, despite low unemployment and steady growth," Hamrick said in a statement. "We don’t know what the future of the economy might bring, but an increasing share of people are anxious about potential job loss or interruption in income."

Other data has highlighted the paucity of savings among the American people. The Federal Reserve's latest Survey of Household Economics and Decisionmaking showed that just 54% of all adults had three months of emergency savings. The Bureau of Economic Analysis figures reveal that the personal saving rate is slightly above 4%, below the pre-pandemic level of 7%. According to recent Empower data, 37% of Americans could not afford an emergency expense of $400. Overall, it is not only the US government that is in poor fiscal health. The average person also is facing financial hardship in today’s economic climate.

It is unsurprising to learn that The Conference Board’s widely watched Consumer Confidence Index tumbled in January on softer labor market concerns. Its Present Situation Index, a gauge of current business and labor market conditions, declined this month. The Expectations Index, a measure of consumers' short-term outlook for income and labor market conditions, slipped and was slightly above the threshold that signals a recession ahead.

“Consumer confidence has been moving sideways in a relatively stable, narrow range since 2022. January was no exception," said Dana M. Peterson, the chief economist at The Conference Board, in the report, adding that pessimism surrounding the job market has returned.

Economists will be bracing for inflation and employment data over the next few months to determine how the economic landscape is faring with a new doctrine in town.

Trumponomics to the Rescue?

While the US economy appeared solid on the surface, a deeper dive into the numbers presented a more skeptical view of the supposed Bidenomics successes. Indeed, jobs have surged, inflation has eased from its peak, and nominal (non-inflation-adjusted) wages have rocketed. However, much of the employment gains were returned from the pandemic, and new jobs have been concentrated in government, government-dependent sectors, and sustenance positions. Inflation remains well above the Fed’s 2% target, and real (inflation-adjusted) wages have slumped 3% since January 2021.

President Donald Trump vowed to usher in a new “golden era” through massive oil and gas expansion, employing a deregulatory strategy, and cutting taxes. The first week of the administration produced results, whether new capital investment or combating illegal immigration. The next four years should be a riveting period for economists to study.