Americans are running out of their savings, no money for further rainy days

The results of a new HSBC consumer survey showed that although the U.S. personal savings rate has risen relative to recent years, the majority of Americans do not have nearly enough savings to sustain themselves should their income cease. The survey also found that if respondents or the primary breadwinner in their home lost their job today, the majority of Americans (61 %) could only live on their savings for three months or less, with 38 % saying they do not even have enough funds to sustain their expenses for one month. The survey was conducted online among a nationally representative sample of over 1,000 U.S. households.

Experts have traditionally recommended having an emergency fund that could last three to six months1, however, the survey finds that only 39 % of respondents are prepared for this. Today, experts are beginning to recommend having enough savings on hand to last at least twelve months: by these standards, only 11 % of Americans are adequately prepared.

Although the length of time people can live off of their savings is broadly correlated with income, the lack of a sufficient emergency fund is a problem that transcends income levels. 51 % of respondents with a household income (HHI) of less than $50,000 could only live on savings for less than one month. Yet despite having a higher HHI, 29 % of respondents with a HHI of more than $100,000 could only live on their savings for up to three months. Those who are prepared for less than one month include families with children (44 %) and adults age 55 and older (31 %). 

Furthermore, the survey uncovered that Americans have good intentions when it comes to saving and financial responsibility, though their savings habits do not generally meet the needs of emergency funds. When asked what they would do if they unexpectedly received $1,000, 63 % said they would pay bills, and nearly 40 % said they would put all or the majority into savings. 

The survey confirmed that many Americans have indeed begun to make changes in how they spend. Thus, over the past six months: 
55 % have cut back on leisure activities 
46 % have cut back on travel 
40 % have cut back on electronics 

Nevertheless, the HSBC survey found there are indicators these adjustments may not be long-lasting. Of those who have reduced spending, 93 % will return to spending in at least one of the areas in which they have cut back once the economy improves. 

David Goeden, Executive Vice President, Personal Financial Services, HSBC Bank USA, N.A., said: “Americans recognize the importance of saving, yet there’s a switch that needs to be flipped in order to embrace a savings mentality. Given life’s uncertainties, saving is a responsibility, not just a luxury. To help Americans grow their savings, HSBC offers a simple, secure online savings account with no minimum balance, no monthly fees and a very attractive rate.”