If you had an unexpected emergency expense of $400, would you be able to pay for it? If your answer is no, you’re not alone. Forty-six percent of Americans said they would have difficulty with an emergency expense of $400.¹ Furthermore, 140 million Americans have little or no savings at all.²
With an emergency fund in your back pocket, you will have the money to pay for the little emergencies that pop up in life. Such emergencies are:
- Job less
- Medical or dental emergencies
- Unexpected home repairs
- Car troubles
- Unplanned travel expenses
Having that extra stash of cash keeps your stress level down and keeps you from making poor financial decisions such as taking out a loan or borrowing from your retirement plan.
Your emergency fund should have three to six months’ worth of expenses in it. That way you’ll be prepared for the curve balls life throws your way. Try cutting back on unneeded purchases, such as lattes on the way to work or buying your lunch every day, and put that money towards your emergency fund.
You may also find it helpful to establish automatic withdrawals from your checking account into your savings account to get your emergency fund started. If you’re struggling to set that money aside and keeping it there (i.e. continually transferring the money you saved back into your checking account) consider setting up a savings account at a different bank so you won’t see the balance daily.
Another great tool to make saving easier is the Digit app (https://digit.co/). For a nominal monthly fee, Digit will help you save money without thinking about it. After you connect Digit to your checking account, they will analyze your income and spending and save small amounts here and there throughout the month so you don’t feel the pinch.
Discover more great ideas on how to establish your emergency fund by checking out this article from Forbes – https://www.forbes.com/sites/nextavenue/2017/08/29/10-ways-to-build-an-emergency-fund.
¹Fed Reserve Report on the Economic Well-Being of U.S. Households in 2015. May 2016.
²CFED Study
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