More than half of U.S. workers lack enough cash to cover a $500 emergency expense, while many are being forced to skip necessities or rely on debt when unexpected costs arise.

A recent survey of 1,028 workers conducted in June found that 55% could not cover a $500 emergency, while 41% said they had skipped necessary expenses such as medical care, food or car repairs because they lacked enough savings, CNBC reported Saturday.

"We have danger more than we’ve had before, because it’s the workers that we know have a job, they have a paycheck coming in, and they are still not making it," Suze Orman, co-founder of SecureSave, told CNBC.

Higher Incomes Aren’t Easing Financial Pressure

The emergency-savings shortfall comes as Americans continue to face higher prices and weaker purchasing power. Consumer sentiment remained under pressure in August, while inflation exceeded wage growth for the fourth consecutive month.

Research from the University of Chicago Booth School of Business and ADP researchers found that real wages fell between December 2020 and 2024 for nearly 40% of workers, suggesting that slower inflation has not fully restored purchasing power lost during the post-pandemic inflation surge.

That pressure can leave households with less money available at the end of each month, making it harder to build the cash reserves needed for unexpected expenses.

Credit Fills the Savings Gap

Households without sufficient emergency savings may increasingly turn to borrowing to cover expenses.

Auto loan balances rose to $1.71 trillion in the second quarter, while credit-card balances climbed to $1.26 trillion, near the $1.28 trillion record reached in the fourth quarter of 2025, according to the Federal Reserve. New delinquencies for both auto loans and credit cards are also at elevated levels, the central bank said.

About 60% of cardholders carry revolving debt, while late-stage credit-card delinquencies remain elevated. A separate survey found that 55% of consumers carry credit-card balances to cover essential expenses.

The combination of rising household debt and elevated delinquencies underscores the financial pressure facing households with limited cash reserves. For workers without enough emergency savings, borrowing can provide a short-term cushion but create another monthly obligation.

Basic Expenses Put Savings to the Test

The pressure is also reaching everyday necessities.

A July study from the Urban Institute found that more than one-quarter of working-age adults who used credit cards to buy groceries either could not pay their balance in full or missed the minimum payment.

About 20% of working-age adults said they had dipped into long-term savings, including emergency funds, to pay for groceries. Grocery prices have climbed 32% over the past five years, adding another strain to household budgets.

Emergency Costs Can Spill Into Retirement

The financial strain can also reach long-term savings.

Vanguard data cited by CNBC showed that 6% of defined-contribution plan participants took hardship withdrawals in 2025, up from 2% in 2020. Inflation and higher interest rates may have contributed to the increase, according to Vanguard.

"Leakage from retirement accounts is becoming a bigger and bigger problem," Shai Akabas, vice president of economic policy at the Bipartisan Policy Center, said, according to CNBC.

That creates a longer-term consequence for workers who lack enough cash to absorb short-term shocks.

Lawmakers Look to Expand Emergency Savings

Congress has already created workplace emergency-savings tools through the SECURE 2.0 Act of 2022. The law allows participants in defined-contribution plans to withdraw up to $1,000 per year for emergency expenses without the usual early-withdrawal penalty. It also allows employers to automatically enroll workers in pension-linked emergency savings accounts, or PLESAs.

Adoption, however, has been limited. Just 4% of 401(k) plans allow the $1,000 emergency withdrawal, according to a recent Vanguard analysis.

A bipartisan Emergency Savings Enhancement Act would increase the maximum annual PLESA contribution limit to $5,000 and expand eligibility to more employees. The bill recently advanced from the Senate Committee on Health, Education, Labor and Pensions, according to the report.

The legislation would build on the existing workplace emergency-savings framework as employers and policymakers look for ways to help workers create financial cushions without forcing them to raid retirement accounts.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

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