How much money Americans have in their savings accounts—nearly half have less than $500

Nearly half of Americans have $500 or less in their savings accounts, an amount that leaves them vulnerable to unexpected expenses, according to a GOBankingRates survey of 1,063 U.S. adults conducted in November 2023.

About 29% of respondents have between $501 and $5,000 in their savings accounts, while the remaining 21% of Americans have $5,001 or more.

Few hold much cash in their checking accounts as well. Of those surveyed, 60% report having $500 or less in their checking accounts, while only about 12% have $2,001 or more.

The lack of cash in either savings or checking accounts suggests that many Americans are living paycheck to paycheck. This leaves them vulnerable to unexpected expenses, underscoring the importance of having an emergency fund, if they’re able to build one.

Financial planners commonly recommend keeping a reserve of cash, known as an emergency fund, on hand to cover unexpected expenses. Yet many Americans don’t seem to have one.

There are many reasons for this. In some cases, Americans may struggle to make ends meet during times of high inflation. But in others, it may be a matter of affluent professionals who aren’t in the habit of saving money.

“The inability of Americans to withstand an emergency costing $500 or even $1,000 can be financially detrimental, with a domino effect on their life,” says Alex Lozano, a certified financial planner and founder of Lozano Group Wealth Management.

That’s because people often rely on high-interest credit cards to cover unexpected expenses, he says.

“Accumulating debt can lead to a cycle of repayment and interest charges that can be difficult to escape,” says Christopher Lazzaro, chartered financial consultant and founder of Plan For It Financial. “An emergency fund helps you avoid falling into this debt trap.”

Lazzaro recommends aiming to build an emergency fund that’s worth three to six months of your expenses, although “everyone’s situation is going to be different.” Someone who is single or with a non-working spouse might want to save up 12 months worth of expenses, he says.

To get started, you’ll need to find room in your budget for monthly emergency savings contributions, which can be easier said than done.

If you aren’t able to cut back on your day-to-day expenses, it may make sense for you to temporarily reduce any contributions to retirement accounts. “Before people begin to invest for their future, they should create an emergency account,” says Lozano.

It’s OK to start small, too, even if that’s putting away only $20 per month. What’s important is that you get in the habit of making regular contributions, which can be increased later when you have more income.

Once you’ve carved out some of your monthly income to build up an emergency fund, it can be smart to stash it in a high-yield savings account where it will collect interest and can be withdrawn quickly in case of an emergency. Currently, you can find high-yield savings accounts with annual percentage yields close to 4.5%, compared with an average of 0.6% for all savings accounts, per Bankrate.

And yet, only 9.8% of survey respondents say they have a high-yield savings account, GOBankingRates found.

One reason people don’t switch over, despite the better rates, is inertia, since many already have a traditional savings account with the bank they’ve been with for years.

But the higher interest rates might be worth the switch. For a $500 balance in a high-yield account offering 4.5%, that works out to $22.50 in interest after one year, compared with just $3 with a traditional savings account.

While that might not seem like a lot of money at first, it will continue to grow over time, especially if you build up your emergency fund to cover many months worth of expenses.

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