Only 4-in-10 Could Pay an Unexpected $1,000 Car Repair or Emergency Room Visit from Their Savings

The average unexpected expense costs $3,518

News Release,

NEW YORK – January 22, 2020 – Only 41% of U.S. adults have enough savings to cover a $1,000 emergency room visit or car repair, according to a new report by Another 37% would need to borrow the money in some fashion: 16% would finance it with a credit card and pay it off over time; 14% would hit up family or friends for a loan, and 7% would take out a personal loan.

“Using a credit card was the most common way for those without savings to pay for emergency expenses,” says chief financial analyst, Greg McBride, CFA. “But this comes at a high cost, as the average $3,500 expense financed at the national average credit card rate of 17% would require monthly payments of $125, taking three years to pay off and incurring nearly $1,000 in finance charges. Whatever savings you can accumulate acts as a buffer from high-cost debt when unplanned expenses arise.”

How common are unplanned expenses?

In the past 12 months, 28% of U.S. adults have had a major unexpected expense themselves or in their immediate family. The median amount of this expense is $1,750. The average amount is $3,518.

“Prepare yourself for the inevitable, unplanned expense by setting up a direct deposit from your paycheck into a dedicated emergency savings account,” adds McBride. “Even $20 per week will add up, getting you to the $1,000 mark by year-end.”

Higher-income households are more likely to pay unplanned costs from savings. Fifty-six percent of those with an income of $50,000 or more would pay from savings compared to 28% of those with income under $50,000.

The lowest-income households (under $30,000/year) were more likely than those with higher incomes to borrow from family or friends (25% versus 8% for all other income groups) or to take a personal loan (13% versus 5% for all other income groups).

Just 36% of younger millennials (ages 23-29) could pay a $1,000 unplanned expense from savings, compared to 41% – 44% for all older age brackets.

Those that are married or living with a partner are more likely to be able to pay the $1,000 from savings (48%) compared to just 30% of those that are not. Similarly, 50% of those that are employed full-time could pay from savings, compared to 32% working part-time and 34% that are not employed.

Parents had a higher likelihood of paying from savings (47%) than non-parents (40%), but fewer than half in either case.

Methodology: 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 December 30, 2019, to January 05, 2020, among a sample of 1,015 respondents in English (980) and Spanish (35). Telephone interviews were conducted by landline (307) and cell phone (708, including 470 without a landline phone). The margin of error for total respondents is +/-3.39% at the 95% confidence level. All SSRS Omnibus data are weighted to represent the target population.

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David M. Higgins II

David M. Higgins was born in Baltimore and grew up in Southern Maryland. He has had a passion for journalism since high school. After spending many years in the Hospitality Industry he began working in Digital Marketing, eventually leading him back to his passion. David started The Southern Maryland Chronicle in December 2017 and has grown it to become the #1 news source in Southern Maryland.

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