You Never Know When the Next Rainy Day Might Hit You. Keep That Emergency Fund Replenished!
An emergency fund is hard to accumulate, but very important in your financial tool kit. After hardships due to a medical emergency or job loss, this can be a lifeline. The economic fallout from the COVID-19 pandemic highlights the need for a safety net to meet financial distress.
According to the Federal Reserve, about 40% Americans are unable to cover unexpected cash expense exceeding $400 while 40% of households with annual incomes less than $40,000 suffered job loss in March 2020. Don’t wait for an economic rebound to save money. Despite facing income disruption or financial hardships, put aside cash for an uncertain future into an emergency fund. Some tips on making your emergency fund work for you:
Why an Emergency Fund?
Many have traditional savings account paying a couple of dollars when convenient or a dedicated and earmarked fund to save for down payment or maybe a dream vacation. Your rainy day fund is a safety net for several months’ living expenses kept in a safe, accessible account for withdrawal during emergency. Some experts recommend $1,000 to begin, while others advise a year’s living expenses. Ideally, emergency savings range from 3-6 months of living expenses. Only you can judge the current amount with readjustments over time.
The Dangers of Being Unprepared
If short on cash, a single emergency adversely affects your financial health. The 2019 Federal Reserve report on U.S. household savings indicates those unable to cover an unexpected $400 expense with cash, use credit card balances or borrow money from friends / family. Habitually resorting to debt lowers your long-term financial health and results in indebtedness due to high-interest accruals, especially as credit card interest on balances exceed 16%.
Is it a Good Time to Begin Saving?
An emergency fund should grow before emergencies but the post-COVID financial crisis impacts all Americans, so save whatever possible for medical bills, essential expenses, and income losses. If six months’ living expenses is an unattainable goal now, don’t be disturbed and start small. Your goal is the destination, not a starting point. Successful saving is about habits, so focus on establishing this habit. During a crisis, work slowly towards a modest goal for a solid future footing.
Small Amounts Make a Difference
Without a stable income, set aside small amounts after expenses are met every week. Without cash inflows, even a few dollars saved, is better than nothing. Consider saving money received via stimulus check or tax refund into the emergency fund, as well. Funds diverted from discretionary spends make a big difference to your fund. It is important to get started by saving a few dollars each week, as the sum adds up over time. As per experts, those with savings from $250 to $750, are less likely to be evicted, miss housing/utility payments, or receive public benefits after job loss, health issues, or large income drops.
An emergency fund is there for you in an emergency. Personalize your savings goal in your fund using budget strategies that work for your financial situation. Establishing an emergency fund for growth over time enables security during uncertain times and better prepared for any financial future. How to stash your emergency fund, determining your savings goal, and alternatives when facing hardship are important decisions.
More in Investments & Savings
Kim Kardashian Fans Reveal the One Inspiring Quality that Made Them Admire Her Despite Her Past
Kim Kardashian has earned her fair share of haters and critics over the years. Fortunately, they’re balanced out by the many...July 2, 2021
Exclusive: Everything That Scarlet Johansson Splurges On
Scarlett Johansson is one of the biggest stars in the entertainment industry. She calls the shots on screen and off-screen with...July 1, 2021
All Those Paris Hilton Scandals Make Her Family Reconsider Her Inheritence
The media personality’s antics, that Paris Hilton was up to ages ago to come into the limelight, have had a huge...June 30, 2021
Super-Rich People Spend Money In Ways That Us Plebs Cannot Comprehend – I
We know the Lannisters pay their debts and Uncle Scrooge enjoys diving into his ocean of money. But how do super-...June 29, 2021
How do Celebs Celebrate Their Birthdays? By Being VERY Extra, Apparently
Have you ever wondered what birthday party you would throw for your friends and family if you suddenly possessed a large...June 28, 2021
All You Need to Know about the Fall and Return of Iceland’s Sole Billionaire
To be among the wealthy places you in an invincible position. Reviewing the wealthiest celebrities today, will any of them ever...June 25, 2021
The Newest Crowdfunding Success is the New Segway Ninebot Scooter. And We Wish We had One, Too!
The KickScooter F Series was fully funded within 10 minutes of its campaign launch on Indiegogo and an outstanding success not...June 24, 2021
These Historical Tours Broke All Records and Made Millions
The lives of musicians today are vastly different from before, due to the proliferation of streaming platforms and social media access....June 23, 2021
Want a Celebrity Endorsor to Boost Your Brand’s Value? Here are Things You Need to Consider First
To get a new company off the ground, the idea of getting a celebrity endorsement for your product or service can...June 22, 2021