Life happens. Maybe it’s an unexpected medical bill, car repair, or home appliance on the fritz. We all need to build a rainy-day fund, because sooner or later it’s going to rain—but many people don’t have this crucial safety net.

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Only about four in 10 Americans (44 percent) surveyed by Bankrate.com for its 2024 Emergency Savings Report said they had enough money in savings to pay for an unexpected expense of $1,000 or more. While some (16 percent) said they could handle the shock to their budgets by cutting back on other spending, 35 percent said they would need to borrow to cover the cost:

  • 21 percent would use a credit card and pay it off over time.
  • 10 percent would borrow the money from family or friends.
  • 4 percent would take out personal loans.

Paying with a credit card and going into debt to deal with an emergency expense is a costly way to deal with the problem.

“You’re paying double-digit interest—the current average rate is nearly 21 percent—which can add hundreds of dollars to the cost of that mechanic’s bill or doctor’s visit,” said Greg McBride, Bankrate’s chief financial analyst. “And if you fall into the trap of making minimum payments on that $1,000 expense, it could take you almost six years to pay it off.”

The Bankrate survey of more than 1,000 adults was conducted in December 2023. The results are similar to those from past years: A majority of Americans continue to live paycheck to paycheck, with 22 percent having no emergency savings.

“That’s concerning to me,” said Mark Hamrick, Bankrate’s senior economic analyst. “When you’re having to focus on paying for necessities, that means that perhaps some things have to be less of a priority. And for some, that means just paying the rent, paying for food, paying for transportation, and not putting as much money into savings.”

How to Save More

Financial advisors typically recommend having a rainy-day fund that could cover three to six months of expenses should the family lose its primary source of income.

That’s a pretty daunting amount, which could explain why few families have that much set aside. Most households (66 percent) don’t have enough savings to cover even one month’s living expenses, according to the Bankrate study.

Kimberly Palmer, personal finance expert at NerdWallet, recommends starting small. Set a reasonable goal and increase it when possible.

“You want to pick an amount that works for your budget, and you just want to make sure you’re setting aside something into that fund,” Palmer told Checkbook.

NerdWallet’s emergency fund calculator can help you determine the optimal size of your rainy-day fund.

Those living paycheck to paycheck likely will find it difficult to find ways to set aside money for savings. But the key is to get started.

“Successful saving is all about the habit,” Bankrate’s McBride told Checkbook. “Having direct deposit from your paycheck or automatic transfer from checking into savings is critically important, especially if you’re starting from a position of little or no savings. That way the savings happen even before you roll out of bed payday morning.”

If you wait until the end of the month and try to save what’s left, you may find that there’s nothing left. But if you can find a way to save just $20 a week, in a year you’ll have more than $1,000 in your emergency fund.

Rather than using a traditional savings account, consider opening a high-interest savings account with an online bank. The highest-yielding online savings accounts currently pay an APY of around five percent, 12 times more than the average savings account, according to the latest survey by CNBC. There is no minimum balance required to open most online savings accounts.

A Little Financial Cushion Can Have a Big Impact

Even a small savings account can make a big difference for a family struggling to get by, according to research by the Urban Institute. Those with as little as $250 to $749 on hand were less likely to miss housing or utility payments or be evicted after an income disruption, the data show.

A few hundred dollars in savings could help you pay a utility bill and that “could keep you from taking out an auto title loan or a payday loan, which can lead you potentially into a spiral of debt,” said Signe-Mary McKernan, an Urban Institute senior fellow.

Of course, the more savings you can build, the better. The institute’s research shows that higher savings are associated with even lower hardship levels. So having more than $750 is going to get you even further.

“But don’t let that wanting-to-get-further keep you from getting started,” McKernan cautioned.

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Contributing editor Herb Weisbaum (“The ConsumerMan”) is an Emmy award-winning broadcaster and one of America's top consumer experts. He has been protecting consumers for more than 40 years, having covered the consumer beat for CBS News, The Today Show, and NBCNews.com. You can also find him on Facebook, Twitter, and at ConsumerMan.com.