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How an emergency fund can alleviate financial stress

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Hispanolistic | E+ | Getty Images

Many young adults have financial stress, and experts say there’s a simple safety net that could help.

About 61% of surveyed Americans of ages 18 to 35 are financially stressed, according to a new Intuit survey. About 21% of respondents say their stress has gotten worse over the past year.

Some of the biggest stressors included high cost of living, job instability and growing housing costs. Of those who identified as financially stressed, 32% said handling unexpected emergencies like medical bills, car repairs and home maintenance trigger their anxiety with cash, the report found.

The site polled 2,000 adults of ages 18 to 35 in December.

Young adults lack a plan for money emergencies

Some of the stress can come from not having a plan — about 32% of all survey respondents admit they lack a clear strategy for managing money setbacks, Intuit found.

Almost half, or 45%, of the group say handling unexpected expenses was a challenge, and 29% have difficulty saving money.

A new report by Bankrate reflects a similar picture. The report found that older generations are more likely to say they could pay for an unexpected $1,000 emergency expense from their savings.

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About 59% of baby boomers, or those of ages 61 to 79, can pay for a $1,000 surprise expense from savings. The cohort is followed by 42% of Gen Xers, or of ages 45 to 60. 

Yet, only 32% of millennials — ages 29 to 44 — and 28% of Gen Z adults — ages 18 to 28 — have the cash readily available, according to the survey, which polled 1,039 respondents ages 18 and older in early December.

“The youngest generations are those who are earliest in their financial journey,” said Mark Hamrick, a senior economic analyst at Bankrate.

‘Setting ourselves up for failure’ without savings

Financial emergencies can catch us by surprise, from needing a locksmith because you lost your keys to unexpectedly losing your job. The best thing you can do to prepare is have savings set aside and carefully using lines of credit, experts say.

“For emergencies, it’s really having that cash reserve in place. That is the financial plan,” said certified financial planner Clifford Cornell, an associate financial advisor at Bone Fide Wealth in New York City.

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Having an emergency savings fund is like having a bulletproof vest, Hamrick explained.

“They won’t save you in all outcomes, but it’s a good start,” he said.

Many Gen Zers need to gear up. About 80% of the cohort are more likely than other generations to worry about not having enough money to cover living expenses if they lost their primary job, per Bankrate data.

That’s compared to 72% of millennials, 72% of Gen Xers and 58% of baby boomers.

“We’re really setting ourselves up for failure if we don’t have sufficient emergency savings,” Hamrick said.

How to start an emergency fund

We’re really setting ourselves up for failure if we don’t have sufficient emergency savings.

Mark Hamrick

senior economic analyst at Bankrate

For every $1,000 you add into a HYSA, you can earn about $40 a year in interest at those rates. While $40 doesn’t sound like a lot at first blush, it’s significantly higher than what you’d earn in a traditional savings account, Cornell said. 

There are many HYSAs available. As you consider your options, you want to double-check the one you pick is FDIC-insured, which protects your deposits at insured banks and savings associations if the company fails.

2. Calculate how much you can save every month

Figuring out how much cash you can save will depend on how much money you earn versus spend in a given month, Cornell said. 

Some rules of thumb can be good starting points. For instance, the 50-30-20 rule is a budget framework that allocates 50% of your income toward essentials like housing, food and utilities, 30% toward “wants” or discretionary spending and the remaining 20% to savings and investments.

Yet, it’s not easy to follow, especially for a young person starting out their career — saving 20% of their income can be a tall order, Cornell said.

It’s fine to start off with less, and look for opportunities in your budget to save more. For example, saving part of an annual raise or tax refund.

3. Set a goal

First aim for three months’ worth of expenses as a goal, Cornell said. Once you meet that goal, consider the next: advisors often recommend you ultimately have three to six months, but some people may benefit from even more. In some cases, it’s a year or more.

Imagine having enough cash that can sustain you during a long stretch of unemployment: “It’s kind of like a pillow or a safety blanket,” he said. 

The more variable your income — say, if you depend on commissions or bonuses, or your income fluctuates every month — the more savings you’ll need to hold you over in case something comes up, Cornell said. 

Keep in mind that coming up with enough savings to tide you over for three months can take a long time. While saving so much can be daunting, experts say even having a small buffer of a few hundred dollars can help.

For instance, the Federal Reserve measures how many adults are able to cover a $400 emergency cost, a much lower benchmark.

Even a small level of savings may be enough to cover minor emergencies, or help offset how much you need to borrow.

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Trump administration loses appeal of DOGE Social Security restraining order

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A person holds a sign during a protest against cuts made by U.S. President Donald Trump’s administration to the Social Security Administration, in White Plains, New York, U.S., March 22, 2025. 

Nathan Layne | Reuters

The Trump administration’s appeal of a temporary restraining order blocking the so-called Department of Government Efficiency from accessing sensitive personal Social Security Administration data has been dismissed.

The U.S. Court of Appeals for the 4th Circuit on Tuesday dismissed the government’s appeal for lack of jurisdiction. The case will proceed in the district court. A motion for a preliminary injunction will be filed later this week, according to national legal organization Democracy Forward.

The temporary restraining order was issued on March 20 by federal Judge Ellen Lipton Hollander and blocks DOGE and related agents and employees from accessing agency systems that contain personally identifiable information.

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That includes information such as Social Security numbers, medical provider information and treatment records, employer and employee payment records, employee earnings, addresses, bank records, and tax information.

DOGE team members were also ordered to delete all nonanonymized personally identifiable information in their possession.

The plaintiffs include unions and retiree advocacy groups, namely the American Federation of State, County and Municipal Employees, the Alliance for Retired Americans and the American Federation of Teachers. 

“We are pleased the 4th Circuit agreed to let this important case continue in district court,” Richard Fiesta, executive director of the Alliance for Retired Americans, said in a written statement. “Every American retiree must be able to trust that the Social Security Administration will protect their most sensitive and personal data from unwarranted disclosure.”

The Trump administration’s appeal ignored standard legal procedure, according to Democracy Forward. The administration’s efforts to halt the enforcement of the temporary restraining order have also been denied.

“The president will continue to seek all legal remedies available to ensure the will of the American people is executed,” Liz Huston, a White House spokesperson, said via email.

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The Social Security Administration did not respond to a request from CNBC for comment.

Immediately after the March 20 temporary restraining order was put in place, Social Security Administration Acting Commissioner Lee Dudek said in press interviews that he may have to shut down the agency since it “applies to almost all SSA employees.”

Dudek was admonished by Hollander, who called that assertion “inaccurate” and said the court order “expressly applies only to SSA employees working on the DOGE agenda.”

Dudek then said that the “clarifying guidance” issued by the court meant he would not shut down the agency. “SSA employees and their work will continue under the [temporary restraining order],” Dudek said in a March 21 statement.

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Most credit card users carry debt, pay over 20% interest: Fed report

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Many Americans are paying a hefty price for their credit card debt.

As a primary source of unsecured borrowing, 60% of credit cardholders carry debt from month to month, according to a new report by the Federal Reserve Bank of New York.

At the same time, credit card interest rates are “very high,” averaging 23% annually in 2023, the New York Fed found, also making credit cards one of the most expensive ways to borrow money.

“With the vast majority of the American public using credit cards for their purchases, the interest rate that is attached to these products is significant,” said Erica Sandberg, consumer finance expert at CardRates.com. “The more a debt costs, the more stress this puts on an already tight budget.”

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Most credit cards have a variable rate, which means there’s a direct connection to the Federal Reserve’s benchmark. And yet, credit card lenders set annual percentage rates well above the central bank’s key borrowing rate, currently targeted in a range between 4.25% to 4.5%, where it has been since December.

Following the Federal Reserve’s rate hike in 2022 and 2023, the average credit card rate rose from 16.34% to more than 20% today — a significant increase fueled by the Fed’s actions to combat inflation.

“Card issuers have determined what the market will bear and are comfortable within this range of interest rates,” said Matt Schulz, chief credit analyst at LendingTree.

APRs will come down as the central bank reduces rates, but they will still only ease off extremely high levels. With just a few potential quarter-point cuts on deck, APRs aren’t likely to fall much, according to Schulz.

Credit card debt?

Despite the steep cost, consumers often turn to credit cards, in part because they are more accessible than other types of loans, Schulz said. 

In fact, credit cards are the No. 1 source of unsecured borrowing and Americans’ credit card tab continues to creep higher. In the last year, credit card debt rose to a record $1.21 trillion.

Because credit card lending is unsecured, it is also banks’ riskiest type of lending.

“Lenders adjust interest rates for two primary reasons: cost and risk,” CardRates’ Sandberg said.

The Federal Reserve Bank of New York’s research shows that credit card charge-offs averaged 3.96% of total balances between 2010 and 2023. That compares to only 0.46% and 0.43% for business loans and residential mortgages, respectively.

As a result, roughly 53% of banks’ annual default losses were due to credit card lending, according to the NY Fed research.

“When you offer a product to everyone you are assuming an awful lot of risk,” Schulz said.

Further, “when times get tough they get tough for most everybody,” he added. “That makes it much more challenging for card issuers.”

The best way to pay off debt

The best move for those struggling to pay down revolving credit card debt is to consolidate with a 0% balance transfer card, experts suggest.

“There is enormous competition in the credit card market,” Sandberg said. Because lenders are constantly trying to capture new cardholders, those 0% balance transfer credit card offers are still widely available.

Cards offering 12, 15 or even 24 months with no interest on transferred balances “are basically the best tool in your toolbelt when it comes to knocking down credit card debt,” Schulz said. “Not accruing interest for two years on a balance is pretty hard to argue with.”

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The 60/40 portfolio may no longer represent ‘true diversification’: Fink

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Andrew Ross Sorkin speaks with BlackRock CEO Larry Fink during the New York Times DealBook Summit in the Appel Room at the Jazz at Lincoln Center in New York City on Nov. 30, 2022.

Michael M. Santiago | Getty Images

It may be time to rethink the traditional 60/40 investment portfolio, according to BlackRock CEO Larry Fink.

In a new letter to investors, Fink writes the traditional allocation comprised of 60% stocks and 40% bonds that dates back to the 1950s “may no longer fully represent true diversification.”

“The future standard portfolio may look more like 50/30/20 — stocks, bonds and private assets like real estate, infrastructure and private credit.” Fink writes.

Most professional investors love to talk their book, and Fink is no exception. BlackRock has pursued several recent acquisitions — Global Infrastructure Partners, Preqin and HPS Investment Partners — with the goal of helping to increase investors’ access to private markets.

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The effort to make it easier to incorporate both public and private investments in a portfolio is analogous to index versus active investments in 2009, Fink said.

Those investment strategies that were then considered separately can now be blended easily at a low cost.

Fink hopes the same will eventually be said for public and private markets.

Yet shopping for private investments now can feel “a bit like buying a house in an unfamiliar neighborhood before Zillow existed, where finding accurate prices was difficult or impossible,” Fink writes.

60/40 portfolio still a ‘great starting point’

After both stocks and bonds saw declines in 2022, some analysts declared the 60/40 portfolio strategy dead. In 2024, however, such a balanced portfolio would have provided a return of about 14%.

“If you want to keep things very simple, the 60/40 portfolio or a target date fund is a great starting point,” said Amy Arnott, portfolio strategist at Morningstar.

If you’re willing to add more complexity, you could consider smaller positions in other asset classes like commodities, private equity or private debt, she said.

However, a 20% allocation in private assets is on the aggressive side, Arnott said.

The total value of private assets globally is about $14.3 trillion, while the public markets are worth about $247 trillion, she said.

For investors who want to keep their asset allocations in line with the market value of various asset classes, that would imply a weighting of about 6% instead of 20%, Arnott said.

Yet a 50/30/20 portfolio is a lot closer to how institutional investors have been allocating their portfolios for years, said Michael Rosen, chief investment officer at Angeles Investments.

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The 60/40 portfolio, which Rosen previously said reached its “expiration date,” hasn’t been used by his firm’s endowment and foundation clients for decades.

There’s a key reason why. Institutional investors need to guarantee a specific return, also while paying for expenses and beating inflation, Rosen said.

While a 50/30/20 allocation may help deliver “truly outsized returns” to the mass retail market, there’s also a “lot of baggage” that comes with that strategy, Rosen said.

There’s a lack of liquidity, which means those holdings aren’t as easily converted to cash, Rosen said.

What’s more, there’s generally a lack of transparency and significantly higher fees, he said.

Prospective investors should be prepared to commit for 10 years to private investments, Arnott said.

And they also need to be aware that measurement issues with asset classes like private equity means past performance data may not be as reliable, she said.

For the average person, the most likely path toward tapping into private equity will be part of a 401(k) plan, Arnott said. So far, not a lot of companies have added private equity to their 401(k) offerings, but that could change, she said.

“We will probably see more plan sponsors adding private equity options to their lineups going forward,” Arnott said.

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