ST. LOUIS, MO--(Marketwired - May 22, 2014) -
- Missouri parents have saved an average of $4,796 for a family financial emergency, about half of the national average
- Experts suggest having three to six months pre-tax income saved
- Parents in Missouri spend on average $1,534 on out-of-pocket medical expenses in child's first year
- BMO Harris Bank offers tips and online tools for future and new parents to manage family expenses
A new study released today by BMO Harris Bank found that 38 percent of Missouri parents with young children do not have money set aside for a financial emergency, slightly more than the national average of 32 percent. An additional 12 percent have less than $1,000 in savings. The average amount in Missouri parents' emergency fund is $4,796, compared to the national average of $9,737. Those planning to have a child in the next five years have almost the same amount of emergency savings as current parents -- an average of $4,778.
The study, which surveyed people expecting to have a child in the next five years and current parents with children less than 10 years old, revealed that in Missouri:
- Thirty-eight percent of current parents have no rainy day funds set aside, the same percentage as future parents
- Twelve percent of current parents with savings have less than $1,000 in emergency savings, on par with the national average (11 percent)
- Of those with savings, most have savings in the range of $1,000 - $9,000 -- over a third of current parents (36 percent), and 45 percent of future parents
- A similar number of current parents and future parents have $10,000 or more saved (14 percent and 17 percent)
"An emergency fund is an important indicator of a family's financial health, and most experts recommend an emergency savings cushion of at least three to six months pre-tax income," said Sandy Washington, Retail Vice President, St. Louis BMO Harris Bank. "It's never too late or too early to start a savings plan, and it's good to see we have parents making savings a priority."
Missouri parents were also asked about other hidden costs associated with a child, and found that the most common costs were increased utility/energy bills (57 percent), one or both parents taking time off or quitting a job to raise the child (41 percent) and needing to buy a car or upgrade to a bigger one (34 percent).
"Consumers are currently saving about 4.5 percent of their after-tax incomes, in line with the average of the past decade. While this is below the more than 6 percent savings rate in the wake of the recession -- as households worked hard to repair their balance sheets -- it remains well above the lows of around 2.5 percent that we experienced during the housing bubble period," said Michael Gregory, Head of U.S. Economics, BMO Capital Markets.
Savings for Medical Costs Need Regular Check-Ups Too
The survey also examined the savings needed to cover medical costs. A majority (87 percent) of parents in Missouri said the cost of healthcare is one of their financial concerns. In addition, the Missouri parents surveyed said they spend an average of $7,870 in medical expenses, with most covered by insurance. The average for out-of-pocket medical expenses for a child in their first year was $1,534. More than a third (35 percent) said they don't know how much they spent.
The survey showed what aspects of healthcare parents and soon-to-be parents in Missouri are most concerned about:
|Healthcare Cost||Parents||Future Parents|
|Regular doctor check-ups||44%||60%|
At the national level the study revealed:
- U.S. parents have an average of $9,737 saved for an emergency
- Future parents have an average of $5,523 set aside
- Average spend on medical costs is $9,676, with $1,297 of that being out-of-pocket
- The most common hidden costs were the need to buy a car or upgrade to a larger vehicle (49 percent), increased utility/energy bills (46 percent) and taking time off work (43 percent).
"As the economy continues to improve this year, particularly on the jobs front, it will help fuel personal income growth. This, along with a steady 4.5 percent savings rate, will result in rainy day savings building up more quickly, but this should not be a call to reduce the savings rate. It would be prudent to keep saving at the same pace, redirecting the flow to help finance future big-ticket outlays, paying down debt or saving for retirement," added Mr. Gregory.
For more information about planning for the next Life Stage, visit bmoharris.com/yourfinanciallife
Survey results cited in this release are from a Pollara survey commissioned by BMO Harris Bank with an online sample of 1,500 Americans (including 150 in Missouri) conducted between November 22nd and 29th, 2013. This includes 993 interviews with parents of children under 10 and 507 interviews with Americans who expect to have their first child in the next 5 years. The margin of error for a probability sample of this size is ± 2.5 percent, 19 times out of 20.
About BMO Harris Bank
BMO Harris Bank provides a broad range of personal banking products and solutions through more than 600 branches and approximately 1,300 ATMs in Illinois, Wisconsin, Indiana, Kansas, Missouri, Minnesota, Arizona and Florida. BMO Harris Bank's commercial banking team provides a combination of sector expertise, local knowledge and mid-market focus throughout the U.S. For more information about BMO Harris Bank, go to the company fact sheet. Banking products and services are provided by BMO Harris Bank N.A. and are subject to bank or credit approval. BMO Harris Bank® is a trade name used by BMO Harris Bank N.A. Member FDIC. BMO Harris Bank is part of BMO Financial Group, a North American financial organization with approximately 1,600 branches, and CDN $593 billion in assets (as of January 31, 2014).