EBRI Issue Brief

Emergency Savings: What Do Workers Have Available in Liquid Savings? How Long Can They Afford a Loss of Income?

Aug 12, 2021 17  pages


An important factor for a family’s financial wellbeing is the ability to cover unexpected expenses, such as a car or furnace repair or something even more financially challenging such as a loss of a job. Being able to cover short-term emergency expenses can help improve workers’ long term financial prospects. However, American families do not appear to be prepared for significant short-term financial emergencies, potentially creating a role for employers to help with the development of emergency savings funds.

The need is clearly outlined in findings from the Federal Reserve’s triennial survey of wealth, the Survey of Consumer Finances (SCF). Findings from the SCF show that:

  • Of all families with working family heads under age 65, less than one-quarter had liquid savings of more than three months of their family income in 2019.
  • This goes up slightly when certificates of deposit are added to the liquid savings.
  • Even if the threshold is reduced to 75 percent of three months of family income, only just over a quarter of families with working family heads under age 65 had liquid savings in excess of this amount.
  • At the median, among all families, less than one month of income in liquid savings was available. This only increased to one and three-quarters months for the families with incomes in the highest quartile.
  • The relatively low percentage of families who had liquid savings that surpassed the three-months-of-income threshold held regardless of the family head’s age or race/ethnicity or of the family’s income. The need for emergency savings was not limited to just the families with low incomes or with younger heads.
  • Families whose heads were defined contribution (DC) plan participants were more likely to have sufficient liquid savings to cover three months of expenses than those headed by a nonparticipant.
  • However, even for families headed by a DC plan participant, the number with sufficient liquid savings to cover three months of expenses would not be considered substantial.

Given the low percentage of families who have sufficient savings to cover a loss of income for any extended period, it is not surprising that more and more employers are seeking to address the overall financial wellness of American workers.  Employer interest in emergency savings programs lies both in the direct potential benefit to workers as well as the benefit to employers in the form of higher employee satisfaction.