As the pandemic enters its most intensive phase yet and job growth stalls, just 39 percent of Americans surveyed say they could comfortably cover an unexpected expense of $1,000.

Underscoring the shaky finances of many Americans, Bankrate’s January Financial Security Index finds that fewer than 4 in 10 U.S. adults could absorb the cost of a four-figure car repair or emergency room visit by tapping into savings.

Fully 18 percent of respondents said they would put the expense on a credit card and pay it off over time, incurring interest charges. Another 18 percent said they could handle a surprise expense without borrowing, but would have to make room in their budgets by scrimping on other items.

An additional 12 percent said they would borrow from family or friends, while 8 percent said they would take personal loans.

“The precarious state of Americans’ emergency savings has been further set back by the pandemic, with nearly as many needing to borrow to cover a $1,000 unplanned expense as those that can pay for it from savings,” says Greg McBride, CFA, Bankrate chief financial analyst.

Key findings:

—During booms and busts, the share of Americans struggling with financial instability has held steady.

—Nearly 4 in 10 Americans would need to borrow to pay an unexpected bill.

—44 percent expect their financial situations to improve this year.

During booms and busts, the share of Americans struggling with financial instability has held steady

The results of Bankrate’s surveys have remained consistent for years. Since 2014, the percentage of U.S. adults who would tap cash reserves to cover a $1,000 emergency has hovered between 37 percent to 41 percent.

The results echo findings from the Federal Reserve and the Pew Charitable Trusts. Both have reported that many Americans haven’t managed to stash away rainy-day savings, and therefore must rely on credit cards or borrowing from friends and family for an unexpected expense.

The higher your household income, the more likely you would be to use savings to pay for unanticipated costs. For households earning $75,000 or more annually, fully 58 percent have built enough of a nest egg to absorb a $1,000 hit, the Bankrate survey found. For households making less than $30,000, just 21 percent have a rainy-day fund to cover $1,000.

Age also matters. Only a third of millennials could turn to emergency funds to pay $1,000. By contrast, 46 percent of Gen Xers and 45 percent of baby boomers said they could cover a $1,000 emergency.

Fortunes improve for some, decline for others

Affluent Americans have done well during the coronavirus recession. Many white-collar workers switched to working from home and continued to collect paychecks. With the stock market and home values at record levels, those who own assets have thrived.

However, service-sector workers haven’t fared so well. Many have lost their jobs as customers stay home. Those who kept their positions have risked their health at workplaces that put them in close contact with other people.

Economists have begun to refer to that disconnect as the K-shaped economy: Those at the top enjoy improving fortunes, while those at the bottom see their financial situations decline.

“Things are getting better for some while getting worse for others,” McBride says. “While things were certainly dire in 2020 for the millions of households that lost a job, had a health issue or suffered an income disruption due to the pandemic, for millions of other Americans, 2020 was a year of significantly boosting savings and paying down debt. Stimulus checks and money not being spent on vacations, ballgames and concerts helped a lot of households better secure their financial foundation.”

On the food line in Florida: ‘We’re surviving’

Long lines of cars at food banks throughout the country illustrate the stark reality of life on the bottom of the K. At a recent food giveaway at a church in West Palm Beach, Florida, school secretary Pamela Bryant was among the two dozen or so motorists waiting in a queue that stretched for two blocks.

Bryant said she lost income to the COVID-19 pandemic and burned through her modest savings. “The little that I did have, I had to use,” she said. “It’s just a tough situation.”

A few vehicles away, Casimira Rodriguez said she lost all of her income as a self-employed house cleaner when the pandemic struck in March. Her husband is still working, but the couple has exhausted their savings.

“We’re surviving,” Rodriguez said.

She hopes to go back to work when the spread of the coronavirus slows, but she’s unsure when that will happen.

Nearly 4 in 10 Americans would need to borrow to pay for an unexpected bill

For adults who would need to borrow to cover a $1,000 emergency, the most common option is putting the expense on a credit card now and dealing with the financial consequences later. A credit card debt was the preferred payment method for 18 percent of Americans.

However, going into debt to deal with a rainy day is expensive. Even as interest rates have plunged on other types of debt, the average interest rate on a credit card remains north of 16 percent, according to Bankrate’s national survey of lenders.

If you don’t pay off that surprise expense quickly, credit card finance charges can add hundreds of dollars to the cost of that mechanic’s bill or hospital visit.

As for the 8 percent who said they’d need a personal loan, many face unsavory options such as high-interest payday loans, says Signe-Mary McKernan, vice president at the nonprofit Urban Institute. She says consumers should look for better options, such as personal loans from credit unions or from employers that offer emergency loans as a worker benefit.

44 percent expect their financial situations to improve this year

Americans are optimistic that 2021 will be better for their finances, with 44 percent forecasting their finances will improve. That includes 12 percent who say their fortunes will get significantly better and 32 percent saying they will get somewhat better.

Just 14 percent expect their finances to get worse in 2020.

Optimism about an improved financial situation in 2021 declines with age. Younger millennials, ages 24 to 30, are the most optimistic, are the most optimistic, with 53 percent expecting an improved financial situation this year. Just 28 percent of Americans age 66 and older think things will improve in 2021.

Half of the highest-earning households expect an improved financial situation in 2021, while just 37 percent of the lowest-earning households feel that way.

Political differences are evident, too. While 56 percent of Democrats expect an improved financial situation in 2021, just 33 percent of Republicans feel that way.

Preparing for tough times

The U.S. economy endured a sharp downturn in 2020. Unemployment spiked into the double digits.

The coronavirus recession served as a stark reminder of the wisdom of stashing away three to six months of living expenses in a no-risk account. While that basic bit of advice hasn’t changed for decades, many Americans still struggle to save, whether it’s because their incomes are barely enough to cover their cost of living or they lack financial discipline.

The results of Bankrate’s latest survey serve as a reminder to get into the habit of saving, McBride says.

“Establishing the habit via direct deposit from your paycheck or automatic transfer from checking into savings is critically important, especially if you’re starting from a position of little or no savings,” McBride says. “If you wait until the end of the month and try to save what is left over, too often there is nothing left over. Becoming a good saver isn’t just a switch that you flip one day.”

While you’ll ultimately want to amass a few thousand dollars in savings, McKernan says workers who are living paycheck to paycheck should start with a modest goal.

“When you hear three months of living expenses, that can be daunting,” she says. “Even small amounts of savings help.”

The Urban Institute’s research shows that setting aside as little as $250 can help consumers avoid eviction, disconnected utilities and other financial calamities, McKernan says.


This study was conducted for Bankrate via telephone by SSRS on its Omnibus survey platform. The SSRS Omnibus is a national, weekly, dual-frame bilingual telephone survey. Interviews were conducted from Dec. 8-13, 2020, among a sample of 1,003 respondents in English (970) and Spanish (33). Telephone interviews were conducted by landline (293) and cell phone (710, including 469 without a landline phone). The margin of error for total respondents is +/-3.58 percent at the 95 percent confidence level. All SSRS Omnibus data are weighted to represent the target population.

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