savings

One in four Americans has more debt than savings

Feb. 21, 2012 at 1:03 PM ET

Many U.S. consumers are so deep in a financial hole that even as the economy begins to turn around they can’t quite dig themselves out.

A survey by Bankrate.com released Tuesday found that 25 percent of Americans have more credit card debt than they have in emergency savings, and that spells trouble if an emergency situation actually hits.

Consumers are doing better when it comes to living within their means, said Greg McBride, Bankrate.com’s senior financial analyst. But, he added, years of stagnant wage growth, high unemployment, declining home values and escalating household expenses have strained wallets. “Even though there’s been progress things are still out of whack,” he said.

And the economic pictures may get even gloomier for consumers if gas prices continue to escalate, he pointed out. Last year, he said, “60 percent of Americans said they cut back on discretionary spending because of gasoline prices.”

Those hit hardest when it comes to debt versus savings, are individuals on the low end of the economic ladder and those with less education, according to the study that polled more than 1000 adults earlier this month.

Here are some of the findings:

  • 70 percent of those earning $75,000-plus have more in savings than credit card debt vs. 40 percent of those earning less than $30,000 per year.
  • 64 percent of college grads have more in savings than in credit card debt vs. 46 percent with a high school education or less.
  • 27 percent of Americans report a lower level of financial security now versus one year ago and 24 percent report a higher level.
  • 38 percent of Americans are less comfortable with their savings now compared with one year ago; only 14 percent are more comfortable.

The overall percentage of consumers who have more emergency savings than credit card debt actually inched up to 54 percent of those polled, compared to 52 percent in the same month last year. But that doesn’t mean people are necessarily more debt adverse.

“They can’t go spend money they don’t have,” McBride explained, because credit is so tight today, particularly when it comes to consumers who don’t have the best credit ratings.

A bad credit rating can also create a double whammy for those people looking for jobs because some employers now use credit reports when evaluating job candidates. That’s even worse news for individuals trying to pay off debt.

High amounts of debt and thin savings have become a fixture in U.S. society. “Over the years, the savings’ needle hasn’t moved,” he said. “From 2007 and 2011, the percentage of Americans with three months worth of expenses in savings, which is not adequate, is unchanged.”

It’s something we may be used to, he maintained, but “it’s not a recipe for people having a warm and fuzzy feeling about their financial situation.”

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