NEW YORK (MainStreet) — Consumers who are saddled with credit card debt and student loans should save money in case of an emergency first instead of attempting to pay down their debt.

About one in four Americans have more credit card debt than emergency savings, and another 13% have neither credit card debt nor emergency savings, according to a Bankrate report.

“These numbers mean that three out of every eight Americans are teetering on the edge of financial disaster,” said Greg McBride, CFA, Bankrate’s chief financial analyst. “People between the ages of 30 and 49 are in the worst shape, probably because of the expenses associated with raising children and paying a mortgage.”

The survey found that 58% of Americans have more emergency savings than credit card debt, up from 51% last year and 55% in 2013.

Creating an emergency fund needs to come first even if you have credit card debt. The best place to sock it away is in a savings account, so consumers have access to it immediately in case an accident occurs.

Having some money stashed away can prevent you from accruing a large amount of credit card debt, said Michael Solari, principal of Solari Financial Planning in Bedford, N.H.

“The reason many people end up with credit card debt is because they don't have any cash set aside for a string of bad luck,” he said. “I would start by paying the minimums and use the extra cash flow to build up some savings. You may end up in the same place.”

The current low interest rates should not be a deterrent. Don’t think about how much money you could be earning on it, because “this is not an investment, but more like insurance,” said Ben Barzideh, a wealth advisor at Piershale Financial Group Crystal Lake, Ill. A rainy day fund should come before paying down debt or investing money, he said.

Younger investors should aim for saving at least $1,000 to $2,000 in case their car breaks down, a pipe inside their house bursts or they lost their smartphone yet again.

Hope Amid Debt

Despite the lack of emergency savings and high debt load, consumers said their financial security has improved, with 24% of Americans who feel more secure in their jobs than they did a year ago, twice as many as the 12% who currently feel less secure. People are feeling better about their net worth by a similar margin, according to the Bankrate survey.

Only 16% of Americans said their overall financial situation is worse than last year, which is a record new low. Americans are feeling better about their debt loads than at any point since June 2013. The percentage of Americans who are less comfortable with their savings used to routinely outnumber those who were more comfortable by a 2-to-1 margin. The divide has narrowed dramatically, and now only 28% are less comfortable with their savings now compared to February 2014 and 22% are more comfortable.

Tax refunds can help matters. 

“Many people are living in the land of very low or non-existent emergency funds and getting an influx of cash such as a tax return is a great way to fix that,” said Scott Halliwell, a financial planner at USAA, a San Antonio-based financial institution. “If you have consumer debt you’re trying to knock down, you might start with a smaller amount like $1,000, just to give you some cushion for the unexpected.”

Strategizing

If you find yourself owing more money than what you have saved away for an emergency, the best strategy is to pay the debt and get it out of the picture as quickly as possible, said Bruce McClary, spokesperson for the National Foundation for Credit Counseling, a Washington, D.C.-based non-profit organization.

“As soon as the debt is out of the way, attention can shift toward growing emergency savings,” he said.

Since many consumers are facing high credit card debt charging an average of 13% in interest, it makes more sense to set debt repayment as the priority since savings rates are a paltry 1% on average, McClary recommended.

The NFCC’s February web poll question asked people what they would do with a tax refund this year, and 68% responded that they would “use the money to pay down debt” while only 11% indicated a preference toward growing their savings.

After paying for your necessities, make sure you pay the minimum on secured debts, which are loans that are secured by a tangible asset, such as a car, said Kevin Gallegos, vice president of the Phoenix operations for Freedom Financial Network, a consumer debt resolution company. The next thing to work on is paying down credit card debt next since “having no credit card debt provides a financial cushion in itself.”

Paying your student loan debt is critical because it never goes away, even in a bankruptcy.

“Make the required monthly payments on student loans, while putting extra money toward paying down high-interest credit card debt, building an emergency fund and saving for retirement,” he said. “The hope is that people can do some or all of these, even in minimal amounts simultaneously.”

--Written by Ellen Chang for MainStreet