Inflation Has Demolished the Average American’s Safety Net. How Do Your Debt and Savings Compare?

For millions of Americans, there’s no such thing as a financial safety net.

That’s according to Bankrate’s latest Annual Emergency Savings Report.

The survey of over 2,500 U.S. adults shows that 33% have more credit card debt than emergency savings. That’s the highest percentage since the survey began tracking this metric 12 years ago.

Nearly a quarter (24%) of respondents have no emergency savings whatsoever.

In a summary of the findings Mark Hamrick, the senior economic analyst for Bankrate, says the trend is a result of tight budgets:

“Most folks in America live paycheck-to-paycheck. This either results in, or coincides with, a lack of liquidity and lack of ability to achieve success with other key financial goals such as paying down debt or saving for emergencies and retirement.”

Here’s a closer look at how that plays out across generations.

Generational differences

The report finds a disparity in financial stability across different age groups. Millennials and Gen Xers are more likely to carry higher debt loads.

Gen Z (ages 18 to 26): 27% have more credit card debt than savings
Millennials (ages 27 to 42): 42% have more credit card debt than savings
Gen X (ages 43 to 58): 39% have more credit card debt than savings
Baby boomers (ages 59 to 77): 24% have more credit card debt than savings

The impact of interest rates

Interest rates remain high, increasing the cost of borrowing. This hits hard for households relying on credit to bridge budget gaps.

According to the report, 66% of Americans would worry about covering a month of living expenses if they lost their primary source of income.

This financial fragility means many consumers are one unexpected expense away from taking on additional debt.

Competing financial priorities

When asked about their top financial focus for the year, Americans are split.

Paying down debt: 36% listed this as their top priority
Boosting emergency savings: 30% cited this as their primary goal
Both simultaneously: 23% are prioritizing both equally

This split illustrates a common dilemma. While financial theory suggests paying off high-interest debt first, the practical need for cash reserves leads nearly a quarter of Americans to attempt both goals at once.

Despite these figures, the majority of Americans remain net savers. The report notes that 53% of households still have more in emergency savings than credit card debt. However, that gap is narrowing as economic pressures persist.

Inflation’s the culprit

When asked why they are saving less, 63% of respondents blamed inflation. Rising prices for essentials like rent and groceries leave little room for building a buffer.

Only 19% of those surveyed said they are comfortable with their level of emergency savings. For the rest, the choice is often between paying a bill today or saving for a problem tomorrow.

Need tips on how to save more? Check out “8 Small Expenses That Are Bleeding Your Budget Dry.”