SOURCE: BMO Harris Bank

BMO Harris Bank

May 22, 2014 07:00 ET

BMO Harris Bank Study: Three Quarters of Illinois Parents Prepared for Financial Emergency

CHICAGO, IL--(Marketwired - May 22, 2014) -

  • Illinois parents report average emergency savings of $11,659
  • Experts suggest having three to six months pre-tax income saved
  • Average out-of-pocket medical expenses in child's first year is $1,268
  • 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 74 percent of Illinois parents with young children have savings set aside for a financial emergency, above the national average of 68 percent. One quarter (26 percent) have nothing saved, and one in 10 has less than $1,000, compared to 32 percent and 11 percent nationally. Those with young children have saved an average of $11,659, while soon-to-be parents have saved less -- an average of $4,980.

The study, which surveyed parents expecting to have a child in the next five years and those with children less than 10 years old, revealed that in Illinois:

  • One quarter of current parents have no savings, and half (52 percent) of future parents have not started saving for a rainy day, or have less than $1,000 in emergency savings
  • Of those with savings, most have savings in the range of $1,000 - $9,999 -- one third (34 percent) of current parents and one fifth (22 percent) of future parents
  • A higher proportion of current parents in Illinois have more than $10,000 saved up than the average American family (30 percent versus 23 percent)

"Financial emergencies can happen at any time, and it's important to have a buffer in place so that you're not forced to take on debt. Start by putting away small amounts each month -- it will start to add up and over time become the safety net you may need. Americans should try to have between three and six months of their pre-tax income saved," said Wallace Harris Jr., Regional President, Chicago Metro North, BMO Harris Bank. "Our survey tells us that Illinois parents are above the national average when it comes to having an emergency fund, which is encouraging news."

Illinois parents were also asked about other 'hidden costs' associated with a child, and found that the most common costs in Illinois were increased utility/energy bills (47 percent), needing to buy a car or upgrade to a bigger one (43 percent) and one or both parenting needing to take time off work or quit (39 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 that was norm 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 parents' concerns specifically around medical costs. A majority (89 percent) of parents in Illinois said the cost of healthcare is one of their financial concerns. Current parents said they spend an average of $12,722 in medical expenses, the majority of which is covered by insurance. The average for out-of-pocket medical expenses for a child in their first year was $1,268. Four in 10 (39 percent) said they don't know how much first-year medical costs were.

The survey showed what aspects healthcare parents and soon-to-be parents in Illinois are most concerned about:

         
Healthcare Cost   Parents   Future Parents
Medical Insurance   60%   62%
Hospital Bills   58%   65%
Prescription Drugs   43%   57%
Regular doctor check-ups   41%   49%
Vaccines/Inoculations   47%   44%
         

At the national level the study revealed:

  • American 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 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 with an online sample of 1,500 Americans (including 150 from Illinois) 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%, 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).

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