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Money Matters for Senior Citizens
Senior Citizens Better Prepared for Financial
Emergency than Younger Americans
All leave money on the table by not taking
advantage of interest rates
 June 21, 2006- Senior citizens are more likely than
others to have emergency savings accounts. More than half of those age
65 and older could get through a three-month emergency but less than 40
percent of all Americans have such a nest egg, according to a new
Bankrate.com poll. It also found many with savings are leaving money on
the table by not taking advantage of rising interest rates. Almost 7
percent earn no interest, and 30 percent are earning less than 3
percent.
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The Bankrate poll indicated that while 70% of the
respondents have at least some money in a savings account, certificate
of deposit, money market account or a money market mutual fund, only 39%
have enough to cover three months of living expenses.
Another troubling finding is that many of the 39%
who have put aside three months' living expenses aren't getting much of
a return on their cash. Only 44% say the money is in an account earning
at least 3%. Nearly 30% have the money in accounts earning less than 3%,
and almost 7% aren't earning any interest at all. This is discouraging
when many online and traditional banks are offering
high-yield savings accounts of 4% or better.
The poll emphasizes the importance of not only
establishing an emergency fund, but making sure it's earning all it can.
Historically, the average annual inflation is about
3%, and 37% of the poll's recipients earn 3% or less on their emergency
funds, which has the same effect as losing principal, according to
Bankrate – "They're losing buying power. By shopping around, people
don't have to leave money on the table."
"The current national average for a money market
account yields a measly 0.79% average, according to Bankrate's weekly
survey of large lenders. But high-yielding MMAs now earn as much as 5%,"
said Daniel P. Ray, Editor in Chief at Bankrate.com.
"The difference is dramatic: Someone with the
average size emergency fund -- $21,938 -- who parks it in the average
money market account earns just $173 in a year. The high-yielding fund
would earn $1,104, a difference of almost $1,000 a year. Whether there's
an emergency or not, that would make a big difference," Mr. Ray added.
Bankrate also found that adequate savings varies by
age and income. Of those earning more than $75,000 a year, 63% have an
emergency fund. At the opposite end, only 20% of those earning less than
$20,000 a year have one.
One in two adults 65 and older have one; one in
five people 18-24 do.
There are minor regional differences, as well.
Northerners are the most likely to save a substantial rainy day fund,
Southerners the least likely, with Midwesterners and Westerners falling
in between.
The national poll was conducted June 16-18, 2006 by
GfK NOP. Key findings of the poll include:
● Only 39% of the poll respondents have emergency
savings accounts, defined as three months' living expenses in a liquid
account. Fifty five percent of the respondents do not, with the
remainder not responding.
● Those who do have an emergency account tend to
keep a large balance: The average was $21,938.
● While few have enough saved to count as a true
emergency fund, most people have at least something tucked away: More
than 70% have some form of savings stashed in a certificate of deposit,
money market account, money market fund or traditional savings account.
● Men are doing better than women when it comes
to having three months' living expenses set aside. Just over 42% of men
say they have at least the minimum set aside, while just under 36% of
women have saved that much.
● Not surprisingly, people with higher incomes
are more likely to have a funded emergency account. More than 63% of
those making $75,000 or more answered "yes" to having adequate emergency
savings, while only 19.5% of those making less than $20,000 had enough
to get through three months.
● How much money do people have in their
emergency fund? Slightly more than 8% have a whopping $50,000 or more.
Nearly 12% say they have between $20,000 and $49,999; 11.2% have between
$10,000 and $19,999; almost 11% have $5,000 to $9,999; 6% have $2,500 to
$4,999, and 8.5% have less than $2,500 saved.
● Geographically, folks in the Northeast are best
at building emergency funds. Nearly 45% of those surveyed who said they
had three months' living expenses set aside hail from that section of
the country. In the rest of the country, between 36% and 39% had three
months of expenses saved.
For more information on this poll, please visit
Bankrate's story by Laura Bruce at
http://www.bankrate.com/emergency .
Survey Methodology:
The study was conducted by the polling firm GfK
NOP via telephone among a nationally representative sample of 1,005
adults, aged 18 or older. The sample was collected June 16-18, 2006,
using a Random Digit Dialing Methodology. The data is weighted by age,
sex, education, rate and geographic region. The study has a 95%
confidence level and a plus or minus 3% margin of error.
About Bankrate, Inc.
Bankrate, Inc. (NASDAQ:RATE)
("Bankrate") owns and operates Bankrate.com, a leading Internet consumer
banking marketplace. Bankrate.com is a destination site of personal
finance channels, including banking, investing, taxes, debt management
and college finance. Bankrate.com is the leading aggregator of more than
300 financial products, including mortgages, credit cards, new and used
auto loans, money market accounts and CDs, checking and ATM fees, home
equity loans and online banking fees. Bankrate.com reviews more than
4,800 financial institutions in 575 markets in 50 states. In 2005,
Bankrate.com had over 46 million unique visitors. Bankrate provides
financial applications and information to a network of more than 75
partners, including Yahoo! (NASDAQ:YHOO)
, America Online (NYSE:TWX)
, The Wall Street Journal (NYSE:DJ)
and The New York Times (NYSE:NYT)
. Bankrate's information is also distributed through more than 400
national and state publications. In addition to Bankrate.com, Bankrate
also owns and operates FastFind, an internet lead aggregator and
Mortgage Market Information Services, Inc. and Interest.com, Inc., each
of which publishes mortgage guides and financial rates and information.
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