If an unexpected expense came up, how would you pay for it? If the answer is not “with cash,” then you need to listen up!
Saving for an emergency isn’t really the fun type of saving — like, say, saving up for a big purchase or vacation — which is a big reason why people just aren’t doing it.
Another big reason people ignore it is because they simply don’t realize how damaging an unexpected expense can be until it’s too late.
Wake-up call: $#*! happens — and when you think about it, not preparing for it is just dumb.
According to a recent GoBankingRates survey, more than half of Americans (57%) have less than $1,000 in savings.
The scary data
According to a survey by Bankrate, only 41% of Americans have savings they can rely on in an emergency.
And for many, it’s not that they aren’t making enough money — 10% of people making at least $100,000 a year said they have no money that they think of as savings.
A lot of people who participated in the survey even said they knew they should have emergency savings that’s easily accessible — but they don’t.
So how would they pay for an emergency?
- 49% said they would use a credit card
- 36% would borrow money from another person
The last thing you want to do is put an unexpected bill on a credit card, because that can easily spiral out of control of cause you money problems for years.
So here’s a look at the best ways to prepare!
Emergency savings: Protecting your future financial security
The best way to save for unexpected financial shocks is to have two separate emergency funds: a rainy day fund and an emergency fund.
- A rainy day fund is money you might dip into every once in a while to cover an unexpected expense, like a medical bill.
- An emergency fund is a bigger, longer-term savings fund. This money should be able to cover at least three to six months worth of living expenses in case you can’t work for a period of time, for whatever reason.
If you’re starting from scratch, these goals may seem impossible — but you can get there!vThe best way to approach saving is to start with baby steps and then build up from there.
IMPORTANT NOTE: One very important thing to remember about emergency savings is that the money should be easily accessible if you ever need it.
So you want to keep the money somewhere safe and where you can get to quickly, like in a savings account. The money may not grow much, but you also don’t risk losing it.