Americans Regret Not Having a Rainy Day Fund
The recent Bankrate Financial Security survey showed that most Americans have regrets about the financial decisions they’ve made. At the top of the list is not saving enough for retirement, but a close second is not saving for emergencies.
Almost half (47%) of Americans would not be able to handle a $400 emergency, according to the Federal Reserve Board. These folks said they would either have to borrow the money or sell something, and 62% would not be able to handle a $1000 visit to the emergency room.
For many Americans, this is the aftermath of the Great Recession – 57% of those who had savings prior to 2008 used up some or all of their savings to weather that storm. Only 39% still have a “rainy day” fund adequate to cover three months of expenses. Although the economic climate has improved, there is no guarantee that another dip will not occur in the future, and that rainy day fund is essential to your financial security.
5 Ways to Grow your Emergency Fund
- Set the goal. Start with $500. Then aim for $1000 for a sudden health crisis. Finally, aim for at least three months of living expenses in case you can’t work or get laid off.
- Decide where to keep the money. Open a separate savings account. The emergency fund should be easily accessible but not part of your normal checking account.
- Make savings a part of your regular budget. Treat it like a bill you have to pay each month. Otherwise it’s too easy to put it off and use the money for something else.
- Use it only for emergencies. Don’t treat your savings account like an ATM. Unless it’s truly an emergency such as a health crisis, a major repair, or being laid off, that money should not be used.
- Put unexpected money into the fund. Tax refunds, birthday checks, or unexpected extra earnings should be put straight in your rainy day fund.
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