In a recent study by Bankrate, it’s revealed that a significant portion of younger Americans, specifically Gen Zers and millennials, are facing financial regrets regarding their lack of emergency savings. Approximately 25% of Gen Zers and 21% of millennials list insufficient emergency savings as a major regret.

Bankrate’s data highlights a broader trend affecting Americans’ financial stability. According to their 2024 emergency fund report, only 44% of Americans have enough savings to cover a $1,000 emergency expense. Alarmingly, over a quarter of U.S. adults lack any emergency savings.

The importance of having an emergency fund is well-known—it can prevent unexpected expenses from disrupting your budget or leading to more debt. Yet, starting and maintaining an emergency fund can be challenging.

Inflation as a Barrier to Savings

One of the primary obstacles to growing emergency savings is inflation. Greg McBride, Bankrate’s chief financial analyst, noted to CNBC Make It that elevated prices are a major concern across all generations. Despite a dip in the annual inflation rate to its lowest since March 2021, certain items, like eggs, saw significant price increases.

“High prices mean your expenses are rising, which makes it harder to set aside money for savings,” McBride explains. “The amount you need to save grows as your expenses increase, complicating the process of accumulating savings.”

Building an Emergency Fund: Strategies for Success

For those looking to build an emergency fund, the key is to make saving a consistent habit. McBride emphasizes that successful saving is about establishing a routine rather than focusing solely on the amount saved.

One effective strategy is to automate your savings contributions. Many employers offer the option to automatically transfer a portion of your paycheck to a savings account. For freelancers and self-employed individuals, most banks provide similar services to automate transfers from checking to savings.

“Automating savings ensures you pay yourself first and live on less than you earn,” McBride notes. “This approach is fundamental to building wealth over time.”

Starting small is perfectly acceptable when building an emergency fund. Matt Schulz, chief credit analyst at LendingTree, advises that even a modest amount can be beneficial. “Any amount of emergency savings is better than none,” Schulz says. “That small reserve can prevent you from using credit cards for unexpected expenses like a vet visit or car repairs.”

In summary, while financial challenges such as inflation can make saving more difficult, creating an emergency fund is crucial. By adopting consistent saving habits and leveraging automation, individuals can better prepare for unforeseen expenses and avoid the pitfalls of inadequate emergency savings.