Americans Are Depleting Their Emergency Funds During the Pandemic

By Lindsay Frankel
Inside Subprime: September 15, 2020

Before the pandemic hit, many Americans were financially unprepared for a crisis. Just 63 percent of Americans would be able to handle a $400 emergency expense with cash or a credit card paid off at the next statement, according to a recent report from the Federal Reserve. The rest would have to borrow money or sell belongings to get by. And when unexpected expenses occur in a higher dollar amount, survey results show that even fewer Americans are prepared; just 41 percent of Americans have at least $1,000 saved for a rainy day. 

Even $1,000 isn’t enough to weather an economic downturn, however. Most financial experts recommend having three to six months of expenses stashed away, which adds up to between $15,609 and $31,219 for the average family, according to average spending data from the Bureau of Labor Statistics. That may seem like a lot to have parked in a savings account, but the current pandemic highlights the need for Americans to have a backup plan in the case of income loss. Unemployment claims may be slowing down, but the insured unemployment rate is still greater than 9 percent. Some families are coming to the end of six months with no income. 

At the first sign of business closures and the promise of an upcoming recession, some Americans hunkered down and began increasing their savings rates to weather the financial uncertainty ahead. One study found that 13 percent of Americans have more saved now than they did before the coronavirus crisis hit. However, the study revealed concerning results as well: About 35 percent of survey respondents said their savings are shrinking. 

Who’s Hurting the Most?

Many Americans have experienced an adverse financial impact of some kind due to the pandemic. 43 percent of U.S. adults report that someone in their household had their income cut or lost their job as a result of the pandemic, according to Pew Research Center. And low-income Americans were not only more likely to be impacted by pay cuts, but were also more vulnerable due to their low levels of emergency savings. 

The financial vulnerability of lower income Americans is reflected in their shrinking savings accounts amid the pandemic as well. In households with less than $50,000 in annual earnings, 44 percent report that the balance in their savings account has decreased since before the pandemic. Compare that to 27 percent of households with incomes above $50,000. 

Emergency SavingsShare of Americans
Less than three months27%
Three to five months20%
Six months25%
Unsure/did not answer7%

Lower income households also had less saved and were more likely to have nothing saved. Only 11 percent of families with incomes below $30,000 had enough saved to cover six months worth of expenses, while 46 percent of families with incomes above $75,000 did. 39 percent of those low-income households didn’t have a rainy day fund at all, while that was true for only 7 percent of the high-income households. 

What Relief Is Available?

The CARES Act provided a round of $1,200 stimulus checks to qualifying adults who earned less than $75,000 annually, a phased out amount for those who earned less than $100,000, and $500 per child. The legislation also boosted unemployment benefits by $600 per week, but that relief has now run dry. It has been replaced with a “lost wages assistance” program that provides an additional $300 per week in federal money to eligible unemployed individuals. 

But not all states have applied with FEMA to administer the program, and many Americans are currently going without boosted benefits. It could take a couple of weeks yet for states to send the additional payments to qualified unemployed people. And Congress is still working out the details of another round of stimulus checks. Democrats and Republicans have failed to come to an agreement on eligibility requirements and the size of the payments. 

How to Rebuild Your Emergency Fund

Generally, in order to rebuild an emergency fund quickly, you’ll need to grow your income or decrease your expenses. 


  • Set a savings goal. Decide on a reasonable time frame in which you’d like to accomplish your goal, and set a goal amount. If you don’t have any emergency savings currently, your goal should be six months worth of expenses. 
  • Evaluate your budget. If you don’t have a budget, it’s never too late to start! Add up your monthly bills, subtract them from your monthly income, and allocate the rest to various spending categories. Find ways to trim unnecessary expenses, such as getting lower rates and premiums, reducing your usage, and cutting back on discretionary spending. For example, increasing your grocery budget slightly could allow you to dramatically decrease your dining out budget. That extra money can go directly into savings. 
  • Get additional income. It’s difficult to find a job right now, but you may be able to pick up a side hustle or ask for additional hours at your current job. If you’re unemployed, just focus on finding job opportunities while you keep your expenses to a minimum. 
  • Open a high-yield savings account. If you keep your money in a basic checking or savings account, you’ll earn about one tenth of the interest you could accrue in a high-yield account. Interest rates are low right now, but there’s still an opportunity to get a little extra income in your savings account each year. 
  • Devote windfalls to saving. If you get an unexpected raise, a gift from a family member, or a second stimulus check, put that money directly into your emergency fund.

If you’ve depleted your emergency fund and are still unemployed, there’s a chance you may need to borrow money. If that’s the case, just be sure you have a plan to pay it back, and rebuild your emergency fund as soon as you are able.

For more information on the middle income consumer, subprime loans and payday loans, see our city and state financial guides including states and cities like California, Texas, Illinois and more.