Study: Americans Shirk on Emergency-Fund Savings

Just 40 percent of Americans have separate savings to cover short-term emergencies like car repairs or urgent medical care.

A Consumer Federation of America study shows that it is those people without an emergency fund who have the most trouble paying for unexpected expenses and that, in turn, makes it harder for them to amass any kind of rainy-day fund.

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Stephen Brobeck, executive director of the CFA, noted in a radio interview with MarketWatch senior columnist Chuck Jaffe that short-term set-asides are different than having three to six months' worth of salary set aside in case of job loss.

"We're talking about the $500 to $2,000 needed to pay for that car repair, the kind of money that can be built up easily, and which then keeps them from having a lot of other financial problems," Brobeck says. "A good question to as is 'How much do I really need to pay for unexpected expenses in a year. ... The median is $5,000 in a year."

The survey of about 1,000 people — taken during the week of Feb. 5 — was released as part of "America Saves Week," an effort of banks and thrifts to help consumers understand the importance of savings.

The survey showed that just 19 percent of respondents ages 18 to 24 have emergency funds, and that just 23 percent of people with a household income of less than $23,000 have them. According to Brobeck, these younger, lower-income wage earners typically say they need about $1,500 per year to cover unexpected expenses.

The CFA report noted that 81 percent of the consumers surveyed believe their rainy-day fund is sufficient to cover their emergency expenses this year. "People with a fund are more likely to be able to afford those expenditures," Brobeck says, while consumers without emergency savings are more likely to rely on high-cost cash from credit-card advances or payday loans to get through an emergency.

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