People think they need about $10,000 to cover any financial emergencies, according to results of a study released Thursday, but more than half of those have only $3,000 or even less in their combined checking and savings account, according to the federal consumer financial protection agency.
In its brief titled “Perceived Financial Preparedness, Saving Habits, and Financial Security,” the Consumer Financial Protection Bureau (CFPB) said the report shows that many people have less money in the bank than they think they need to deal with emergencies, which can lead them to feel unprepared to weather financial shocks.
“These feelings of unpreparedness could manifest in lower levels of financial well-being and a greater likelihood of consumers feeling that they are not in control of their finances,” the report states.
The bureau said the results outlined in the brief are derived from its “Making Ends Meet” survey, which aims to explore consumers’ savings- related behaviors, experiences, and outcomes. The survey was developed by the CFPB’s Office of Research and is a nationally representative survey of U.S. adults with a credit bureau record.
In the brief, CFPB notes that the difference between what people think they need and what they have in their checking and savings accounts is likely a “lower bound.” “In particular, we capture the combined amount of money households have in their checking and savings accounts, and, while some money in a checking account could be earmarked for saving, at least some of those funds are likely earmarked for regular bills and other necessities (e.g., rent, utilities, food).”
The report also asserts that the amount people report they and their family “need in savings for emergencies and other unexpected things that may come up” goes up with household income, but that the increases are relatively modest.
“The median amount people report they need in savings rises from $5,000 for those in the two lowest income groups (household income of $40,000 or less) to $15,000 for those in the highest income group (household income above $100,000,” the report notes.
“For many people, the amount they report needing in savings does not align with the amount in their checking and savings accounts, and this misalignment is greatest for people with lower incomes,” the report states.