“I didn’t have enough money for gas. I arrived late. It was humiliating.”
As transportation costs have increased, due to the Iran war, Americans are using emergency savings to cover everyday needs.
The data on thousands of employees’ emergency savings accounts — and the quote above, from one such user — comes from a provider of the accounts, a company called SecureSave.
In late March, as energy prices rose, about 12% of all employee withdrawals from SecureSave accounts were earmarked for use for transportation, an increase of about 35% compared to the same period last year.
Devin Miller, co-founder and CEO of SecureSave, told USA TODAY that with many Americans living paycheck to paycheck, and the savings rate near a long-term low, households are in a “precarious” situation.
“We’ve found that it’s the little things that bother people — not necessarily job loss or major health events, but often very mundane things,” Miller said.
“We get stories from people saying, OK, I have my life dialed in, I’m driving to work and I know what it’s going to cost and what I’ve budgeted,” he said. “It could be a sudden increase in gas prices and my budget is just broken.”
Costs rising due to Iran war
“Prices at the pump have increased dramatically and consumers were not prepared for this,” said Kareem Marshall, director of climate and energy policy at the Consumer Federation of America, a non-partisan advocacy group.
“It’s certainly directly due to the Iran war,” Marshall said, “but the war is one of many causes.” The consumer has to pay its price.
While the war is indeed driving inflation throughout the economy, Marshall and other observers say it is just the latest chapter in a years-long cost-of-living crisis affecting American families.
Emergency savings accounts were developed as a solution to smooth out household budget messes, from major accounts to more regular budgets, as noted by Miller.
“For people living on low to moderate incomes in the United States, the overall affordability challenge has been widespread,” said Nick Maynard, senior vice president of The Commonwealth, a national nonprofit focused on financial security. The group has played an important role in helping to design and track the use of accounts.
“Car repairs, health care cuts, the kid’s school uniform, the pet that needs it and doesn’t have enough insurance coverage, all kinds of emergencies come up, and (homes) plug the holes in different ways,” Maynard said.
What are emergency savings accounts?
Maynard told USA TODAY there are several benefits to accounts like SecureSave offers. Employees make deposits through their paychecks, so this is an automatic transfer and not something that must be actively initiated. It also offers what he calls a “dynamic” process: paying, using, and then replenishing. This is a more useful – and achievable – approach to savings than trying to get people to commit a lump sum all at once.
The funds are deposited into an account designated as “savings”, so users are reminded to use it for real needs, not indulgences. When they initiate a withdrawal, they are asked to provide a reason – although unlike tax-advantaged programs such as flexible savings accounts, the specified use is not defined by law.
Because the accounts are offered in the workplace, some employers may choose to contribute some of the money to their employees as well, or at least encourage their use. Maynard said employers including Delta Airlines, AutoNation and The Fresh Market have taken full advantage of such programs and their employees value the benefits.
A ‘trickle effect’ through personal budgeting
While Americans face emergency spending during every economic cycle, Miller believes the desperation seen in some of SecureSave’s data points to a key differentiator this time.
When one account holder was asked why he was tapping the money for transportation, he said, “My car broke down and I had to take the bus, which made me late several times.”
The anecdote, and dozens like it, represent what Miller sees as “deep and profound” reality.
“The compounding factor is that they miss shifts. When you miss shifts, you make less money. When you make less money, your budget stretches even more. And that shows how the simple thing of increased transportation costs and gas prices can have a drastic impact through a personal budget.”
While many people made strange remarks about gas prices in their withdrawal requests, car repairs are mentioned frequently. That’s no surprise: The cost of vehicle parts, which come from all over the world, is rising along with the expense of transporting them around the world, Marshall said.
“For consumers, what we’re really concerned about at this point is that most people don’t have a lot of money in their accounts, so they can’t absorb the additional shock.”
Reporting by Andrea Richier, USA TODAY. USA TODAY Network via Reuters Connect.