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America Saves Week: The Importance of Building Emergency Savings
Clinton Key, Pew Charitable Trusts

February, 2016

Millions of U.S. households are one unexpected expense away from financial distress. America Saves Week, an annual national campaign dedicated to helping solve this and related problems, provides a key opportunity to investigate ways to address families’ financial insecurity. From Feb. 22-27, financial institutions, community groups, and schools will participate in activities to promote healthy savings behavior for households and individuals.

Pew’s research on family finances underscores the precarious state they are in and highlights the things policymakers could do to help:

Many families need stronger financial footing
  • Millions of U.S. households are one unexpected expense away from financial distress. America Saves Week, an annual national campaign dedicated to helping solve this and related problems, provides a key opportunity to investigate ways to address families’ financial insecurity. From Feb. 22-27, financial institutions, community groups, and schools will participate in activities to promote healthy savings behavior for households and individuals.

    Pew’s research on family finances underscores the precarious state they are in and highlights the things policymakers could do to help:

    Many families need stronger financial footing
    • Six in 10 households suffered a financial shock in the past year. 
    • The typical family spent $2,000 on its most expensive shock—half a month’s income. 
    • Although the economy is improving, half of respondents to Pew’s Survey of American Family Finances described their family as financially insecure.
    • Only 1 in 5 families said they have a lot of control over their finances. 
    • 55 percent of households struggled to “make ends meet” after experiencing their most expensive financial shocks.
    • 80 percent of families had less in savings than they recommend for people like them.

    3 research-based strategies that could help families save more

    1. Automatic savings mechanisms

    Automatic savings mechanisms can help families accrue savings over time. Although many people have the option to automatically direct money into retirement savings, few have this choice for short-term savings. 

    Increased opportunity to automatically transfer funds to savings might help families build on the typical family's $3,800 in liquid savings and close the gap between what people have saved and the amount they want to have.

    One successful, if unrecognized, automatic savings mechanism is income tax withholding. For the 72 percent of households that receive a tax refund, their paycheck withholding acts as de facto savings, holding a portion of their income in reserve that is later distributed as a lump sum. This tax refund is a significant opportunity to both pay down debt incurred from prior financial shortfalls and prepare for unexpected expenses down the road.

     

    To read more, go to http://www.pewtrusts.org/en/research-and-analysis/analysis/2016/02/22/america-saves-week-the-importance-of-building-emergency-savings?sl&utm_campaign=2016-02-24%20PNN&utm_medium=email&utm_source=Eloqua

     

     



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