By: Daryl Tolliver
Having a healthy savings account not only enables consumers to plan ahead for big purchases or investments, but also to protect themselves from financial ruin the face of unexpected hardship. While many individuals understand the importance of sufficient savings, a new study shows that many households are at risk of devastation in the event of a job loss, medical bill or home repair.
According to a new survey from personal finance resource CreditDonkey.com, 41 percent of respondents have no cash safety net. In addition, 59 percent of participants have only $500 or more sitting in their savings account. Further, the study notes that the percentage of those with little to no savings are not those living at or below the poverty line. Instead, they are two-income households with pricey homes and vehicles, retirement accounts, luxury holdings, investments and, in many cases, credit card debt.
The Corporation for Enterprise Development has labeled these households "liquid cash poor," because while they may hold assets, property and other valuable items, they would have few options in the event of an emergency in which they needed immediate cash, the news source explains. As a result, a job loss or car repair may have the ability to impose serious financial hardships for these individuals.
Consumers fear never being able to save money
The study also showed that many respondents recognized the position they are in, and fear that they may never be able to save sufficiently for their futures. For example, 45 percent said they believe they will never be able to save much money, while 38 percent fear not having a sufficient nest egg for retirement. Another 14 percent fear they are losing most of their money in the stock market.
Many Americans recognized the need for liquid savings following the recession, and the current economy also makes a good case for having cash reserves built up. These scenarios represent a strong opportunity banks and credit unions have to highlight their programs and wealth-building opportunities. Both credit union and community banking programs are typically more affordable than those offered by national banks, and most continue to offer cash-back reward programs and other services to help Americans both save and earn. However, many consumers may be unaware of the different available products, making it crucial that local institutions reach out to a wider demographic of people.