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Adequate Savings: The Key to Financial Wellness

Ferguson Hayes Hawkins, PLLC Jan. 25, 2017

No one ever plans to go into bankruptcy. To the contrary, a significant number of bankruptcies can be traced back to unexpected life events, like a job loss, divorce or illness. When these crises hit, the combination of interrupted income and added expenses can be financially devastating.

When events like these happen, having a robust emergency savings account can mean the difference between weathering the storm and falling into bankruptcy. Those without sufficient savings often end up relying on credit cards to make ends meet. As the bad times drag on, even the minimum payments quickly become unmanageable. Combine this with late fees, medical bills, missed loan payments and other financial problems, and it’s not hard to see how bankruptcy can result.

Unfortunately, the bad economy has made it difficult for many people to build their savings accounts. With incomes lower and jobs still difficult to find, people are finding it hard to have anything left over to put aside at the end of the month.

Many Have More Debt Than Savings

In fact, not only has the savings rate fallen during the recession, but credit card use has also increased. According to a new survey from, only 55 percent of Americans have more in savings than they do in credit card debt.

Even though the savings rate has started to grow since the depths of the recession, the survey shows that millions of Americans are still at risk of facing serious financial problems. Most experts recommend that individuals keep at least three month’s worth of pay in an emergency savings account.

The survey revealed some interesting data about who is saving and who isn’t. It found that men tend to be better savers than women — 60 percent of men reported having more in savings than in credit card debt, while only 49 percent of women said the same. In addition, parents tend to be fairly good savers. Just 29 percent of parents with children under age 18 reporting having credit card debt that exceeded their emergency savings.

Unsurprisingly, individuals with higher incomes reported better debt-to-savings ratios. Approximately two-thirds of survey respondents who earned more than $75,000 per year reported having more savings than credit card debt. By contrast, only 41 percent of respondents earning less than $30,000 per year were in the same position.

Filing for Bankruptcy

If unmanageable debt problems do arise, filing for bankruptcy may be the best solution. A successful bankruptcy will discharge most outstanding debt, giving the filer a chance to start over fresh. If you are struggling with your debt, talk to an experienced bankruptcy attorney who can evaluate your situation and help you understand the best options for moving forward.