Over a third of Americans have less than $400 in savings, study reveals

The Federal Reserve has just unveiled the highly anticipated 2023 Economic Well-Being of U.S. Households report, which sheds light on the current economic landscape of families across the nation.

The researchers survey households and report on the findings of those results, which this year include finding that over a third of households, 37 percent to be exact, would not be able to use cash, savings, or their credit card (without carrying a balance that incurs a penalty) of an emergency expense $400 or greater. This $400 threshold is significant as it represents a common unexpected expense, such as a car repair or medical bill, for which many households may not be prepared to make. Though it is obvious, it is essential to reiterate the importance of saving in evaluating the overall well-being of households. In 2022, inflation rocked not only the U.S. economy but those around the world. With the Russian invasion of Ukraine upending global energy markets, the increased cost of moving goods and people was reflected in price increases for most consumer goods. While inflation has softened last, the percentage of households that could not cover a $400 emergency expense did not.

Households that can save are more likely to be able to purchase a home, enjoy their time off by going on vacation, access educational enrichment activities and resources for their children, and much more. When households cannot put money away each month or have a budget that exceeds their income, they can be pushed into debt, face high interest rates on credit cards, and see their credit take a beating. This lack of financial security can have long-term implications for households, making it harder to weather unexpected expenses or invest in their future. Some landlords ask that tenants provide their credit score, as do institutions offering loans.

Household savings are falling sharply

However, it’s not all doom and gloom. During the height of the COVID-19 pandemic, the federal government stepped in to bolster household finances. By increasing the value of unemployment benefits, expanding SNAP eligibility and benefits, and distributing stimulus checks, they managed to boost household savings significantly. The Bureau of Economic Analysis (BEA) reported a substantial increase in personal savings, with figures reaching $2.67 trillion in 2020 and $2.21 trillion in 2021, up from the 2019 average of $ 1.19 trillion. However, if state and federal governments do not act, households’ financial well-being could continue, creating vulnerabilities for the economy as a whole.

In 2019, the average stood below those figures at $1.19 trillion.

In 2022 and 2023, personal savings, which include the total amount of money saved by individuals and households, continued to decrease, falling to under $1 trillion. In March 2024, it reached $671 billion. Inflation and the termination of pandemic-related assistance programs took a toll on savings, and the impact was evident. In June 2022, as energy prices soared and inflation began to affect the U.S. and global economy, personal savings dropped to $552 billion. Apart from a few months in 2022, personal savings have been relatively low since 2013.