Less than half of Americans can cover a surprise $1,000 expense, survey finds

A standard barometer of financial health is how much money you have socked away for the proverbial rainy day. By that measure, millions of people in the U.S. are in danger of getting soaked. 

More than half of Americans lack the savings to cover a surprise $1,000 expense, according to a new survey from Bankrate. And fully a third of households would have to use a credit card, take out a personal loan, or borrow money from family or friends to handle such an emergency.

Of that number, 20% of the respondents indicated they would cover unplanned costs using plastic — a move many experts advise against given the average interest on variable-rate credit cards last year topped 16%, Bankrate's data shows. 

In all, just 44% of the more than 1,000 adults polled by Bankrate reported having enough money squirreled away to cover such an expense, the personal finance site found. That's actually slightly better than last year, when only 39% could afford to cover a $1,000 hit — such as an unplanned medical or car-related expense.

The rule of thumb is that people should have three to six months' worth of expenses set aside for an emergency. 

The paucity of savings in the U.S. cuts across generations. While only 42% of Generation Z consumers — those ages 18 to 25 — could handle a sudden four-figure expense, 44% of baby boomers (ages 58 to 76) and 48% of Gen Xers (42 to 57) had enough money put away, Bankrate found. 

One factor that's making it harder for people to save: inflation. Consumer prices soared 7% in 2021, the biggest jump in nearly 40 years, the Department of Labor reported last week. That surge is raising the cost of food, shelter, energy, new and used cars, and other necessities. Nearly half of those polled by Bankrate said higher inflation was thwarting their efforts to save.

Millions of families are also feeling the pinch now that the enhanced Child Tax Credit (CTC) has lapsed. Under the federal program, bolstered last year to offer relief to households impacted by COVID-19, parents got payments of as much as $3,600 annually per child, up from $2,000. 

But the CTC has stalled in Congress along with the rest of the Biden administration's latest relief measure, the Build Back Better Act. Parents got their last check from the government program in December.

For many low-income Americans, saving money is out of the question when even putting food on the table is a struggle. More than 10% of adults — 22.7 million people — face food insecurity, meaning they sometimes or often don't have enough to eat, new Census data shows. The figures also show that nearly a third of people report having difficulty paying for typical household expenses.