U.S. consumers are little prepared to handle unexpected emergency expenses, as 31% have no more than $500 in mad money to handle life bumps and a staggering 20% have zilch in the cookie jar.
On the other end of the spectrum, over a quarter of Americans (26%) said they had $8,000 or more set aside for unexpected emergency expenses.
The survey suggests Americans aged 65 and over are likely to have the most money set aside for unplanned expenses, with nearly half (48%) of Americans within the age group reporting having $8,000+ in emergency funds (vs. 20% of those ages 18-64).
In comparison, Americans aged 18-34 were most likely (45%) to have $1,000 or less in emergency funds (vs. 24% of those ages 35+), suggesting a notable gap in the state of finances between older and younger generations.
HomeServe USA (HomeServe), a leading provider of home repair solutions, released these findings as part of its Winter 2017 edition of the HomeServe Biannual State of the Home Survey.
Beyond the ability to cover their costs, HomeServe also surveyed Americans on the types of unexpected expenses they believe could be a challenge for them in the next year. Over half of Americans (52%) cited car or vehicle repairs could cause them an unplanned expense in the next 12 months. This finding could be a potential result of today’s consumers holding onto their vehicles longer than ever.
According to IHS Markit, the average length of vehicle ownership in the U.S. measured a record 79.3 months at the end of 2015 – nearly doubling the same measure from Q1 2005.
Nearly half of Americans (49%) cited medical emergencies as a potential unexpected expense for them in the next 12 months– a finding with added significance given the level of national attention and political debate around the topic of healthcare in recent months.
Among the different types of anticipated emergencies, over 2 in 5 Americans (42%) noted home repair emergencies as a likely potential cause of an unexpected expense in the next 12 months.
However, when asked specifically about the likelihood of actually experiencing a major home repair emergency in the next year, 71% of Americans believed it was not likely. This was in contrast to the 54% of Americans reporting that they had dealt with a home emergency repair in the past year.
While Americans’ expectations and reality in regard to home repair emergencies are not aligned, the HomeServe survey found that homeowners are saving more, which may aid in being better prepared for unexpected home repair costs. Just under half of homeowners with money set aside for home repair emergencies (48%) reported having $5,000 or more in funds – a nearly 20% increase from the Summer 2015 edition of the survey (29% in Summer 2015).
The increase in homeowners with a sizable home repair emergency fund likely explains why – among homeowners who had some money set aside – the percentage with $1,000 or less fell from 52% over the approximately 20 months since the Summer 2015 survey to 35% in the Winter 2017 edition. Furthermore, 16% of homeowners cited having no money set aside to cover the costs of a home repair emergency, down from the 25% found in the Summer 2015 survey. Overall, these survey findings suggest that since the summer of 2015, the state of household finances among American homeowners has steadily improved.
When asked how they might utilize an extra $1,000, 24% said they would use the money to pay down debt from credit cards or loans, while 19% of Americans said they would put the funds towards building their personal savings. Sixteen percent of Americans would use the extra funds to take a vacation or trip. Notably, parents of children under 18 were less likely than those who do not have children under 18 to opt for building out personal savings (10% vs. 22%, respectively), but more likely than those who do not have children under 18 to use the extra $1,000 towards a vacation or trip (21% vs. 14%, respectively).
However, the HomeServe survey found that older Americans aged 65 and over were more likely than younger age groups to use the money towards home repairs or renovations (13% vs. 5% of those ages 18-44 and 7% of those ages 55-64).