Emergency savings: Can Americans afford home repairs during the pandemic?
Even prior to COVID-19, Americans weren’t typically big “savers.” By some estimates, as few as 23% of Americans had savings accounts big enough to cover six months of expenses. But then the pandemic did hit – an emergency of its own. So how are people able to save now? And more poignantly, are they able to afford the home-related emergencies and repairs that crop up, especially now that they’re spending so much more time indoors?
We recently spoke to more than 1,000 people across the country to find out more about their home-repair capabilities and prioritizations. Are they simply dealing with broken items and forgoing repairs in the home because of that lack of savings? The pandemic has ironically forced us to confront the home improvements we’d need as it simultaneously removes the funds needed to complete them. Keep reading to hear how Americans are handling this conundrum today.
Savings status quo
For the purposes of our study, we allowed respondents to define what “emergency savings,” meant to them. We simply asked if they had what they considered to be an emergency amount, as well as how many months of rent or mortgage they actually had saved. Finally, we took a look at what COVID-19 did to these emergency funds and compared the results by gender and generation.
Eighty-five percent of Americans stated they had emergency savings, at least to some degree. That said, more than 1 in 10 said they had none at all, and of course, savings in America took a major hit during the pandemic. In fact, more than a third (36.1%) said their emergency accounts had decreased since March.
Even though most respondents had enough in their accounts to get them through the next few months in terms of rent or mortgage, 1 in 3 said they could not afford a home repair right now. Millennials, for instance (who some say were hit worst by the pandemic), still held onto an average of 6.1 months worth of rent or mortgage payments, but a third agreed a home repair was not in their budget. And 1 in 5 baby boomers (who had an average of seven months worth of rent or mortgage payments left) said they could not afford a home repair either.
So what does it look and feel like to be living at home without the financial ability to fix a repair? Keep reading to find out.
Affording the repair
The next part of our study specifically looked at how many agreed they could afford an emergency home repair. We also asked how much they could contribute to an emergency home repair, regardless of how much they had in their overall savings account. We again compared across generational lines.
Twenty-seven percent of people said they couldn’t afford emergency home repairs right now. To give an idea of just how significantly home repairs can slice through a budget, know that respondents who did cover an emergency home repair recently saw it decrease their savings by 44%.
Assuming a repair costs exactly $1,000, 25% of people admitted they could not afford it. Once again, millennials were struggling in this area the most. They were the only generation with more than a quarter of whom could not cover a $1,000 home repair. Baby boomers appeared more equipped to handle this, in spite of the fact that many are actively delaying retirement to recoup the losses from the pandemic. Of course there are minor repairs that may cost less than $1,000, but some intensive, and perhaps desperate, situations in the home may require much more capital than this.
Fueling financial fears
But is the pandemic really all there is to blame? Evidently not, as respondents will soon share. The next part of this study asked participants to explain the reasons they have for being fearful of paying for emergency home repairs. On a more optimistic note, they shared their related aspirations for 2021.
Very few people were able to honestly say they were totally without fear when they thought of paying for home repairs. Eighty-five percent were fearful of the concept to at least some degree. When we asked why, most thought of the age of their house. Financial experts estimate that you should expect to spend between 1% and 4% of your home’s value every year on maintenance, which means if your home cost $200,000, you should probably have somewhere between $2,000 and $8,000 to spend on upkeep. This large range of upkeep, however, depends on the age of the house – an impact respondents appeared keenly aware of.
Fear may be a powerful motivator behind the goals respondents outlined for 2021, however. Four out of 5 respondents planned on saving money next year specifically for home repairs. Interestingly, generations who appeared best-suited for current financial emergencies echoed this home-repair goal even more: Baby boomers were the most likely to have intentions to save for home repairs in 2021. Perhaps this is because of how many of this generation were forced into retirement by COVID-19 and have an increased incentive to spruce up their surroundings.
Making it work
So what happens when someone desperately needs a home repair? What repairs are people legitimately facing at the moment, and what exactly would they do to afford to fix it?
Twenty-three percent of respondents were currently delaying repairs to water damage in their home. This alone is estimated to cost upwards of $2,500 to improve, which suggests why so many are delaying the cost. That said, living with water damage can be detrimental to your health, causing everything from air toxicity to mold. In order to fix something like this, however, 61% said they would have to go into debt (which is also known to be detrimental to health). Twenty-three percent were putting off fixes to their water heater, and more than 1 in 10 were even delaying fixing termite damage.
With all of these incredibly common issues and common barriers to repair, 71% demonstrated interest in repairing their homes in the future. Three out of 4 planned to start saving money, and 42% considered fixing the repair as worth going into debt for. And baby boomers, who currently had the most saved, were also the most likely to consider going into debt for a repair. This may reflect increased costs of preparing a home for retirement or less of a willingness to delay major fixes than their younger counterparts.
Confronting the improvements
Home improvement is not an easy task but certainly one that comes with the territory. Respondents are being confronted with this truth in the middle of a pandemic and often delaying home repairs to the point of inhibiting their health or considering taking on debt. But things don’t have to be like this: There is expert help to be found.
Cinch Home Services is an affordable and award-winning home warranty that helps control the costs of appliance and system breakdowns. You can instantly schedule an appointment with a prescreened local service and have someone who is ready to help you fix and save today. Even in a pandemic, you are not alone.
Methodology and limitations
We collected responses from 1,023 people using the Amazon Mechanical Turk survey platform where they were presented with a series of questions, including attention-check and disqualification questions. 52% of respondents identified as men, while 48% identified as women. Participants had an average age of 39 and a standard deviation of 11 years. A participant incorrectly answering any attention check-question had their answers disqualified. Participants who were not responsible for the financial upkeep of their home were also disqualified. Please note that survey responses are self-reported and are subject to issues, such as exaggeration, recency bias and more.
Fair use statement
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