The most common financial regret among young Americans can be prevented with these simple steps.

Not saving enough for emergencies is the top financial regret for about a quarter of Gen Zers and 21% of millennials.

According to new data from Bankrate, Gen Zers are defined as individuals aged 18 to 27, while millennials are defined as those aged 28 to 43.

According to Bankrate's 2024 emergency fund report, only about 44% of Americans would be able to cover a $1,000 emergency expense using money from their savings, while a little over a quarter of adults in the U.S. have no emergency savings at all.

It is widely recognized that an emergency fund can help prevent an unforeseen expense from disrupting your budget or exacerbating your credit card debt. However, beginning the process of building an emergency fund can be challenging.

What are the factors that prevent Americans from increasing their emergency savings, and what is a simple strategy to help you start saving?

Inflation is the main obstacle to building emergency savings

Despite their desire to increase their emergency funds, each generational cohort cited inflation and high prices as the primary obstacles, according to Greg McBride, Bankrate's chief financial analyst, as reported by CNBC Make It.

Since March 2021, the annual inflation rate has not been as low as it was in July, as determined by the consumer price index, which tracks the price changes of common goods and services. Despite this, some categories, such as eggs, experienced a nearly 20% increase in price from July 2020 to July 2021.

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Emergency savings can be more challenging for consumers of all ages when prices are high, according to McBride.

"As prices rise, so do expenses, making it harder to save money."

Make saving a habit to build your emergency fund and wealth

To build an emergency fund, the first step depends on your individual financial circumstances. However, McBride emphasizes that "the key to successful saving is making it a habit."

Instead of focusing on the amount you can save for your emergency fund, consider finding a consistent strategy to maintain it. One way to achieve this is by automating your savings contributions.

You can automatically allocate a portion of your paycheck towards your savings account if you work for an employer that allows it. Similarly, most banks enable freelancers and self-employed individuals to set up automatic transfers from their checking account to a savings account.

""By automating that process, you're essentially paying yourself first and enforcing a lifestyle of living below your means, which is the foundation of wealth accumulation over time," McBride remarks."

You don't need a large sum of money to begin building your emergency fund; you can start small by saving what you can and increasing your contributions as your financial situation improves.

"According to Matt Schulz, having an emergency fund, no matter how small the amount, is better than not having one. Even a small amount of money can prevent the need to use a credit card during an emergency, such as a vet bill or a flat tire."

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