- Everyday Americans have a far more negative view of the current economy than experts, according to a recent Bankrate survey.
- About 40% of Americans think a recession has already begun or will start in less than a year, while experts think an economic downturn is at least one to two years out.
- Despite their bleak predictions, nearly one-third (28%) of Americans say they have no emergency fund, while 25% have some savings, but it would cover less than three months of expenses.
- Experts recommend saving enough cash to cover up to six months’ worth of expenses or more in a high-yield savings or money-market account, where it can earn interest but remain accessible.
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Too many Americans aren’t ready for the recession they predict is right around the corner – or already here.
According to a new Bankrate survey of 1,000 Americans, there’s a jarring disconnect between experts’ and everyday Americans’ views of the current economy. Forty-seven per cent of everyday Americans think the United States economy is in good shape and 12% think it’s “excellent,” but 40% say it’s either “not so good” or “poor.” Meanwhile, Bankrate asked nine experts for their take: They all rated the economy either good or excellent.
The US economy is, in fact, less than a month away from recording its longest expansion ever, Business Insider’s Akin Oyedele reported. Despite adding far fewer jobs in May than expected, the unemployment rate held steady at 3.6%.
Still, everyday Americans see a recession coming sooner than experts do, and 20% think it has already begun. About half of the experts surveyed predict a recession will begin in the next year to two years, while the rest think the economic downturn won’t start for at least two more years.
“The Macroeconomic indicators are great – the unemployment rate is at a 50-year low, GDP growth has been solid, markets are buoyant and inflation is low and stable,” Julia Coronado, president of economic research firm Macropolicy Perspectives, told Bankrate. Despite this, many Americans have still struggled to gain their financial footing since the last recession.
“However we know there is an issue with rising inequality of both income and wealth that leaves many households still feeling vulnerable,” Coronado continued. “There is a generational dimension to rising inequality – millennials came of age in a bad labour market and are still struggling to build savings and wealth and job security.”
An emergency fund is crucial for weathering a potential recession
Although they’re bullish about a forthcoming recession, nearly one-third (28%) of Americans surveyed by Bankrate say they have no emergency savings to fall back on. Twenty-five per cent have some savings, but it would cover less than three months of expenses. More than half of Americans said they’d feel most comfortable having at least six months worth of expenses in an emergency fund, but only 18% of the respondents do.
These findings underscore those of a recent survey by Harvard Business School Online and City Square Associates, which revealed that two out of every three people reported they are not prepared for a recession.
“There might be some apathy because the economy has been strong for so long but that’s precisely the reason people need to get prepared,” Patrick Mullane, the executive director of Harvard Business School Online, told Business Insider’s Frank Olito. “I can’t tell you when a downturn will happen, but it will happen.”
Maintaining a cash reserve is crucial for weathering potential job loss or other unexpected emergencies that may arise during a recession. Securing an emergency fund and diversifying your investments across, and within, stocks and bonds and are two of the most important ways to protect your money, regardless of the state of the markets, financial expert and bestselling Ramit Sethi previously told Business Insider.
Sethi recommends keeping cash reserves equal to at least three months and, ideally, up to a year’s worth of expenses to fall back on whenever it’s needed. The best place to keep that emergency fund, rainy day fund, “oh f—” fund, or whatever you call it, is usually in a high-interest bearing account, like a high-yield savings or money-market account, where it remains within arm’s reach but continues to grow while you’re not using it.
- Read more:
- 2 steps to take to protect your money from a recession, according to a financial expert and bestselling author
- A financial advisor says there are 4 smart ways to grow your emergency fund – here’s how they stack up
- I borrowed a strategy from my 401(k) to build up a cash emergency fund 2 years ago, and I’m never turning back
- How to open a high-yield savings account online to earn up to 200 times more interest on your money
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