More Americans Tap Emergency Savings as Transportation Costs Surge

“I did not have enough money for gas. I arrived late. It was humiliating.”

As transportation costs surge, aggravated by the Iran war, Americans are increasingly tapping emergency savings to cover day-to-day necessities.

Data from tens of thousands of employee Emergency Savings Accounts – and the quote above, from one such user – come from a company called SecureSave, a provider of the accounts.

At the end of March, as energy prices surged, nearly 12% of all employee withdrawals from SecureSave accounts were earmarked for use for transportation, a roughly 35% increase over the same time last year.

With many Americans living paycheck to paycheck, and with the savings rate near longtime lows, households are in a “precarious” position, SecureSave co-founder and CEO Devin Miller told USA TODAY.

“What we have found is that it’s these little things that trip people up,” Miller said – not necessarily job loss or major health events, but often very mundane items.

“We get anecdotal stories from people, okay, I’ve dialed in my life, I’m driving to work and I know what that’s going to cost and what I’ve budgeted,” he said. “It could be just all of a sudden gas prices spike and my budget’s just broken now.”

Iran War Is Driving Costs Higher

“Prices at the pump have increased dramatically and consumers were just not ready for this,” said Karim Marshall, director of climate and energy policy at the Consumer Federation of America, a nonpartisan advocacy group.

“This is definitely directly because of the Iran war,” Marshall said, “But the war is just one of several causes. The consumer ends up eating the cost.”

While the war is indeed driving up inflation across the economy, Marshall and other observers say it’s just the latest chapter in a years-long cost-of-living crisis gripping American households.

Emergency savings accounts were developed as a solution for smoothing over rough patches in household budgets, from the major ones Miller mentioned, to the more routine.

“For folks living on low to moderate incomes in the United States, the overall affordability challenge has been pervasive,” said Nick Maynard, a senior vice president with Commonwealth, a national nonprofit focused on financial security. The group has been instrumental in helping design and track usage of the accounts.

“The car repair, the health care deductible, the child’s school uniform, the pet who has a need and not enough insurance coverage, all sorts of emergencies come up, and (households) plug holes in different ways,” Maynard said.

What Are Emergency Savings Accounts?

There are many advantages to accounts like the ones SecureSave offers, Maynard told USA TODAY. Employees make deposits via their paychecks, so it’s an automatic transfer rather than one that must be actively initiated. It also offers what he calls a “dynamic” process: paying in, using, and then replenishing. That’s a more useful – and attainable – approach to saving than trying to get people to build up one lump sum all at once.

Funds accumulate in an account designated as “savings,” so users are reminded to tap it for real needs, not indulgences. When they initiate a withdrawal, they are asked to describe the reason – although unlike with tax-advantaged programs like Flexible Savings Accounts, designated usage isn’t defined by law.

Because the accounts are offered at the workplace, some employers may choose to contribute some money alongside their employees, or at least to encourage their use. Employers including Delta Airlines, AutoNation, and The Fresh Market have taken full advantage of such programs, and their employees value the benefit, Maynard said.

A ‘Trickle Effect’ Through Personal Budgets

While Americans have had emergency expenses throughout every economic cycle, Miller thinks the despair reflected in some of SecureSave’s data points to a key differentiator this time around.

“My car broke down and I had to take a bus, which made me late a couple of times,” one accountholder said when asked why they were tapping funds for transportation.

The anecdote, and dozens like it, reflect what Miller sees as a “profound and intense” reality.

“The compounding factor is they miss shifts. When you miss shifts, you make less money. When you make less money, your budget’s even more blown up. And that shows how the simple thing of increasing transportation costs and gas prices can have this trickle effect through individual budgets.”

While many people spoke anecdotally about gas prices in their withdrawal requests, car repairs are mentioned just as often. That’s no surprise: the cost of vehicle parts, which come from all over the world, are also increasing alongside the expense of moving them across the globe, Marshall said.

“For consumers, the thing that we really worry about at this point is most people don’t have a lot of excess money in their accounts, so they can’t absorb additional shock.”

Reporting by Andrea Riquier, USA TODAY. USA TODAY Network via Reuters Connect.