Please ensure Javascript is enabled for purposes of website accessibility

This Group of Americans Lacks Emergency Savings in a Very Big Way

By Maurie Backman – Mar 16, 2019 at 6:18AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

And while it's not surprising, it is problematic.

Life has a way of throwing unwanted surprises at us when we least expect them. Whether it's a home repair, a problem with your car, or a health issue, you never know when you might get hit with an unplanned bill your regular paycheck can't pay for. That's why we all need emergency savings -- money in the bank to pay for life's unknowns. Yet a large number of Americans don't have that protection in place -- particularly those who find themselves caught between being financially responsible for their children while also supporting older family members.

It's known as the sandwich generation, and it's generally people in their 30s and 40s who have no choice but to parent young ones while caring for aging loved ones simultaneously. The problem, however, is that those who find themselves sandwiched often struggle not just in terms of their time, but also their financial resources. An estimated 38% of members of the sandwich generation don't have an emergency fund, according to PNC Financial Services Group data. Yet those are the folks who probably need that safety net more than others, since they face the potential for emergencies on both the child and older family member front. They're also the ones who might struggle to build savings the most.

Young girl, woman, and older woman embracing


When working more isn't an option

Many people who lack emergency savings can go out, get a second job, and boost their bank accounts with the proceeds from that extra work. Folks who have no choice but to care for their children and older family members, however, may not have that same option. In fact, many caregivers struggle to work at all. If you're part of the sandwich generation and lack savings, your best bet might boil down to living as frugally as possible for a period so you can bank the savings you reap from cutting back on expenses.

One of the most crucial steps you can take in this regard is to create a budget. Doing so will give you a sense of what you're currently spending and where there's room to cut back. From there, you can review your different expense categories to determine which give you the most leeway.

For example, it's easier to cut back on leisure and restaurant meals than it is to pack up your entire home and move to a smaller one that'll cost you less money to rent or own. On the other hand, if you're busy taking care of children and older family members, takeout food might be unavoidable -- especially if you all your care responsibilities leave you with no time to cook. Therefore, you'll really need to see where every dollar of yours is going and what options you have for spending less.

Remember, too, that even small changes can add up over time. Downgrading your cable plan, for example, might put $40 more a month back in your pocket. Over the course of a year, that's close to $500. It's a start.

At the same time, don't hesitate to have open conversations with your older family members if providing care is draining your financial resources, or limiting your ability to work and earn the money your family needs. You never know what financial assistance your older relatives might be able to offer in exchange for your help, so it pays to be honest about your predicament and see what options exist.

Either way, make building an emergency fund a priority, because the last thing you want is to get hit with an unplanned expense and wind up in debt because of it. Once you rack up debt, it's hard to break out of that cycle, so you're better off avoiding it at all costs in the first place.

The Motley Fool has a disclosure policy.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.