Emergency savings accounts need a boost, study finds

July 27, 2010

By Barbara Marquand | Money Rates Columnist

About a quarter of Americans think the economy and their personal financial situations will be worse this year than last year, according to The 2010 MetLife Study of the American Dream released July 26.

That sounds pretty grim, considering how bad the last couple of years have been.

But the results actually show significant improvement over last year when 44 percent expected conditions to worsen. Apparently most people believe the economy and their finances have finally bottomed out, and in this tough environment, that's about as good as the news is going to get.

About 41 percent of study respondents this year believe the U.S. economy and their personal financial situations will stay the same and one-third think the economy will be better this year. Most people, though, think full recovery is still three or more years away, and many feel like they're living close to the edge, MetLife says.

Savings Accounts Lacking

A troubling 45 percent don't think they could take care of expenses for more than a month if they lost their jobs, and 65 percent say they could not cover expenses for three months. More than half, 55 percent, are worried about losing their jobs. Two-thirds don't think they have an adequate safety net, including enough emergency savings, insurance and retirements savings, according to MetLife.

Financial experts advise maintaining an emergency savings account to cover at least three to six months of expenses in case of a job loss. Emergency savings should be held in liquid investments, such as savings accounts, money market accounts or CD ladders -- multiple certificates of deposit with staggered maturity dates to provide regular access to cash.

Not surprisingly, a lot of people are stressed out. Almost half of respondents, 45 percent, say concerns about making ends meet are keeping them up at night, and 52 percent are feeling more job stress.

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