These Americans Are Still Having a Hard Time Saving for an Emergency

Americans are doing a little bit better at saving money in an emergency fund — but women, some minorities, young adults, and the less educated are still woefully unprepared for a financial emergency, according to a new study.

Overall, there have been marginal gains in the number of Americans who say they could come up with $2,000 to cover a surprise expense “in the next month,” according to the study published by the Financial Industry Regulatory Authority (FINRA), the financial industry’s self-regulatory board.

In 2012, 40% said they probably or certainly could not so do. In 2015, that number had fallen to 34%, FINRA says. Similarly, in 2012 some 35% said they were certain they “could come up with the full $2,000.” That number is now 39%. The improvements, while narrow, suggest the “financial fragility” of Americans is slowly easing.

Wide gaps among different demographic groups tell a far more pessimistic story, however. Here are some of the findings.

Gender: Women are in a much more fragile position. While 28% of men said they probably or definitely could NOT cover a $2,000 expense, fully 39% of women said they could not.
Age: Those over 55 are in a far stronger position. While only a quarter of that group said they probably/certainly could not raise $2,000 in a month, 43% of those under 34 said they couldn’t.
Ethnicity: Whites are better off than Blacks or Hispanics, but Asians are most prepared. While 30% of Whites said they probably/certainly could not come up with $2,000, only 24% of Asians said so. Hispanics (39%) fared worse than both groups. Most alarming however, is that nearly half of African Americans (48%) said they probably/certainly could not, making them the most fragile ethnicity. In fact, among demographic groups of all kinds, only those with incomes under $25,000 fared worse.
Income: Not surprisingly, income levels tracked tightly with financial fragility. Still, 11% of those earning more than $75,000 annually said they probably/certainly could not deal with a $2,000 emergency. One-third of those earning between $25,000-$75,000 said they could not, while 63% of those earning less than $25,000 said they couldn’t.
Education: School attainment levels were also a solid predictor of financial fragility. Only 18% of those with a college degree or more probably/certainly could not deal with a $2,000 emergency; but 45% of those with only a high school degree or less said they could not.

“Consistent with previous years, the 2015 NFCS finds that measures of financial capability continue to be much lower among younger Americans, those with household incomes below $25,000 per year, and those with no post-secondary educational experience,” FINRA said in its report. “African Americans and Hispanics, who are disproportionately represented among these demographic segments, also show signs of lower financial capability, making them more vulnerable.”

It’s important to note many of the demographics that appear to be having a harder time saving for emergencies have been found in various studies to earn less income than their counterparts.

Overall, the findings are consistent with plenty of other studies showing Americans are poorly prepared for financial emergencies. In March, for example, the Associate Press-NORC Center for Public Affairs released poll data with even bleaker numbers. Two-thirds of consumers in that study told the center they would have trouble coming up with funds to cover a $1,000 emergency.

Analysts have long wrestled with the problem of understanding Americans’ lack of savings. While the recession clearly made it harder for Americans to save, Americans weren’t great savers back in the boom years, either. In fact, by some measures, America’s overall savings rate fell below zero — the nation was spending more than it was earning — back in 2005.

Saving isn’t sexy, and it isn’t lucrative, either. Most traditional savings accounts offer barely perceptible interest rates, and even most Internet-only banks offer less than 1% returns.

The tax code is at least partly to blame, too. While tax-advantaged retirement accounts like 401K plans heavily encourage saving for the long term, there is no similar nudge to convince U.S. consumers to save for the short or medium term. Both Canada and the U.K. permit 401K-like accounts that encourage saving money to be used before retirement. Lower-income Americans can participate in “Individual Development Accounts” designed to encourage savings, but no such tax-advantaged plan is available to the general public. The idea has been floated several times in the U.S – President George W. Bush proposed something similar, called Lifetime Savings Accounts, back in 2003 — but the idea has not taken hold.

Remember, spending more than you’re saving — or, worse, earning — could ultimately land you in debt, which can wind up further taxing your bank account and damaging your credit score. You can see how your current debt levels are affecting your credit by viewing two of your credit scores, updated every 14 days, for free on Credit.com. You can also find some tips for getting out of debt here.

Image: Pamela Moore