Help Tar Heels better prepare for emergencies by helping them build their own "rainy day" funds

North Carolina residents had several days’ notice that Hurricane Florence was headed straight to Southeastern NC.  Despite warnings to evacuate, many residents stayed in their homes.  While their reasons varied, many cited that they don’t have the means to pay for lodging, gas and food to move to a safer place, even though free shelters were available to them.

 

Additionally, in the hurricane’s aftermath, people were shocked to learn that insurance policies usually won't cover the flood damage, and only three percent of homeowners had FEMA flood insurance.  For many who lack the personal savings to pay deductibles, their most urgent home repairs, and other storm-caused expenses, will have to wait.

This is sobering reminder that, according to the Federal Reserve, four-out-of-ten adults can’t cover a $400 emergency expense without borrowing. That low savings rate isn’t isolated to the young or the unemployed. A 2013 Federal Reserve Survey of Consumer Finances also found that 30 percent of households with older workers had less than $2,000 in liquid savings.

It certainly doesn’t take a named storm to create a financial shock to household savings. When looking at people's emergency savings, a Pew Charitable Trust study in 2015 found 60 percent of US households faced an expense or loss of income during the previous year for which they did not budget.

The Pew report called this lack of savings an “indicator of economic fragility.”  For minorities, the fragile ground is even softer. For example, black households with an income of less than $55,800 annually, have saved on average 37 percent less than whites. Latinos at that income level are saving 62 percent less.

As the state looks for ways to put its residents on more solid ground, shared recovery goals shouldn’t focus solely on rebuilding homes and businesses. Effective disaster “recovery” must also focus on “resiliency.” The easiest way to get started is by giving North Carolinians easier ways to save.

Savings shortfalls, as well as the factors that contribute to them, deserve a closer look by lawmakers during special hurricane recovery deliberations. Other states have found easier ways for workers to save – and now is North Carolina’s chance to improve our savings for emergencies, our retirements and other worthy goals.

With our state reeling from back to back hurricanes and millions of residents without adequate emergency savings, we can’t wait any longer to study and weigh the merits of savings proposals.

Banks, credit unions and savings advocates like AARP have simple proposals that could help the legislature tackle this problem.

The state has a rainy day fund and its residents should have them too. Let’s work together to build greater financial resiliency so we are better prepared for any of life’s emergencies large or small.

Getty Images/Vetta

NC General Assembly, as part of its Emergency Session for Hurricane Florence, should create a study or task force that will examine why many people in the hurricane-affected area didn’t have emergency savings to evacuate, or to recover, and to recommend potential initiatives that could change savings behaviors. The study should also assess how this lack of emergency savings inhibits longer-term savings, such as retirement savings, healthcare savings, and home ownership.