Americans lack emergency savings but more say they aren't worried about it, survey finds

Ben Tobin | USA TODAY

Show Caption Hide Caption More OK with lack of emergency savings: Survey USA TODAY asked individuals how much they worried about emergency savings and why they found saving to be important.

No emergency savings? No problem!

At least that's what nearly 1 in 5 respondents implied in a new survey on savings habits.

When asked if they were comfortable with having no savings set aside for emergency use, 18 percent agreed, according to a new report from consumer financial services site Bankrate.com. In a related question, almost half of respondents (47 percent) who have savings to cover less than three month’s expenses say they are somewhat comfortable or very comfortable with their savings amount.

Because financial emergencies are bound to happen at one time or another, people would be misguided in feeling secure about their insufficient cash reserves, said Bankrate.com’s chief financial analyst Greg McBride.

“People are kidding themselves if they have any level of comfort with that (inadequate savings),” McBride said.

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The Bankrate report found that nearly one-in-four Americans have no emergency savings available to them. This means, when financial emergencies arise, they do not have any living expenses stored in a bank to deal with a sudden job loss or to cover unplanned bills.

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A bias toward optimism?

One reason that people may feel calm in a bad financial situation is a growing attitude that having little to no savings is “normal,” according to Gina McKague, owner and founder of McKague Financial in Michigan.

“Everyone’s pretty much in the same boat: If no one’s well-prepared, then no one feels ill-prepared,” McKague said.

Many people also fall victim to something Rich Ramassini, senior vice president and director of strategy and sales performance for PNC Investments in Pittsburgh, calls “it won’t happen to me” syndrome. Also known as an “optimism bias,” this psychological phenomenon causes people to believe they are less likely to experience negative outcomes.

In the case of emergency savings, Ramassini said individuals are comfortable with little to no savings because they believe they won’t ever run into a situation where they need the extra cash. “Their comfort comes from an avoidance of the reality of risk and the hope that they won’t be faced with an emergency,” he said.

Different generations, different attitudes

According to Bankrate.com’s report, millennials (ages 18-37) are among the most likely age groups to feel very or somewhat comfortable with their savings amount. Yet they are also among the most responsible age groups with emergency savings. Experts credit the 2008 financial crisis with making the youth more aware of the importance of saving. However, not all millennials are focused on storing money away.

“I think [emergency savings are] very important, but I’m not doing it so often because there are a lot of things to spend on,” said Krystyna Giemza, 22. “My (financial) situation is stable, so I’m not worrying about it too much.”

Meanwhile, younger baby boomers (ages 54-63) are the worst generation when it comes to spending habits, with 30 percent having no emergency savings. Ramassini said this is because individuals “burying their heads in the sand” about their finances.

“Once you’ve gone so long and are so far away from your goals, then this whole resignation (attitude) may set in to say ‘that’s never going to happen for me,”’ he said. “It’s pretty hard to motivate yourself if you’ve already admitted defeat.”

To avoid this, experts say individuals should start budgeting money specifically to emergency savings from a young age.

Michael Nowicki, a former union worker and father of three children, said following that advice is no easy task.

“In a perfect world, [people should start saving] right out of school once you start working,” Nowicki said. “But that’s impossible with student loans and just life on life’s terms.”