Although more than 80% of Americans think it is important to have a financial backup plan to see them through unexpected crises, just 45% of survey respondents say they actually have such a plan, State Farm reported Thursday. Of those who have a plan, 58% say it’s not written down and only exists in their head.
There’s more pressure to have an emergency fund now than before, too, because whatever cash reserves Americans had before the downturn have likely been exhausted, the survey found. Just over one-third of respondents said they have enough saved to get through three months of expenses, but 15% have just enough to get through a single month.
"With the economic downturn and concerns about continued slow growth, it's critically important that people take a clear-eyed look at their financial situation and develop realistic options they can have in place should unexpected financial difficulties pop up," says Joe Monk, senior vice president and chief administrative officer for State Farm Life Insurance Co., said in a press release.
The survey noted that while almost 70% of respondents say they feel well-prepared to handle a crisis, many of the so-called solutions create other problems. For example, 61% of respondents said they would borrow from their 401(k) plans. One-third would downsize their home and 22% would move in with family.
"Taking money from a 401(k) creates more vulnerability later in life, homes are not the piggybanks they once were, and not all people are in the position to take in extended family,” Monk said.
Over half of respondents said they would take a lower paying job if they were out of work for six months or more. More than two-thirds of respondents over 55 say they would take a second job if they had to.
"People naturally think the unexpected happens to somebody else. But setbacks can hit anyone and people need to be ready. Regrettably, most are not," Monk added.