Posts

1 in 4 Americans Don’t Have $400 in Emergency Savings

/in , /by

According to a 2018 Federal Reserve study, 1 in 4 Americans don’t have $400 in emergency savings. That means if they had an unexpected expense such as a medical emergency or car repair, they would have to turn to debt to cover the cost. The additional debt just leads to more financial instability as struggling families must find ways to make the additional payments. You can see how all of this becomes a vicious cycle.

You must have an emergency savings account!

Your financial stability depends on having an emergency savings fund. It doesn’t have to be massive. Start small and let it grow over time. Your first savings goal should be $1000. With just $1000, you can cover many car repairs and can handle an urgent care visit… all without needing to borrow money or turning to high interest credit cards.

Grow your savings over time.

Once you’ve established your emergency savings account, keep adding to it until you have 3 to 6 months of expenses saved up. At that level, you can weather a short loss of income like a lay off at work or a hospital stay.

If it’s not an emergency, don’t touch the money.

Seriously! It’s called Emergency Savings for a reason. Repairing your car so that you can commute to work is an emergency. Paying for medical expenses is an emergency. Buying a new flat screen TV is not an emergency, even if your only TV fell off the wall and shattered. Basically, if the expense doesn’t help you get to work and pay the bills, keep you and your family healthy, put food on the table, pay the utilities, keep a roof over your head, or meet any other fundamental requirement to live, it’s not an emergency.

If you use it, pay it back!

If you do need to dip into your emergency savings account, pay it back as quickly as you can. You’ll need that money soon enough. Life has a way of happening just when we expect it least and your emergency savings fund helps to smooth out those bumps in the road.

 

No Emergency Savings

/in , /by

According to a recent survey by NeighborWorks America, more than a quarter of American consumers have no emergency savings fund. If you are one of those 25%, you probably feel like you are living one disaster away from a financial crisis. What happens when the car breaks down or you have a health emergency? Without an emergency savings fund, you might not be able to cover the bill from your regular pay check.

Not having emergency savings is a very big problem for homeowners living on the financial edge. When the furnace goes out in a rental property, all you have to do is call the landlord and they are responsible for fixing the problem…at no cost to you. However, if you are a homeowner, you don’t have that same luxury. When you own your home and something breaks, you are the one that has to pay for repairs.

Most financial experts recommend that you have 3 to 6 months of expenses sitting in your emergency fund. With that amount of savings, you can weather storms like job or income loss or a health crisis. An emergency fund on that scale can cover many home repairs. Don’t have that kind of emergency savings? Start small and save what you can. Even just $1,000 can make modest repairs to your car and your home.

Start Saving Now

Want to start an emergency savings fund? Go over your budget and decide how much you can afford to save and make saving automatic. That means having the money deducted right out of your paycheck and deposited into a savings account specifically set up for emergencies.