While it’s encouraging to see the majority of our 4,336 survey respondents taking this important step towards financial health, there is always room for improvement when it comes to preparing for the unexpected.
Experts say you should aim to save three to six months’ worth of living expenses in the event of a significant drop in income or an unexpected costly event such as a car repair or medical procedure. However, this is not an easy task. Especially considering that 58% of respondents earn their living.
You may not be able to pay off 6 months of expenses right away, but that’s okay. However, keeping even a small amount in the bank can help you avoid debt in an emergency. From there, you can keep growing your savings until you’re happy with the amount.
Find out below how your savings accumulate and steps you can take to increase your emergency fund.
Among those who already have emergency savings, men are more likely than women, older people are more likely than young people, and white Americans are more likely than black, Hispanic, or Asian Americans to do so. A survey revealed.
And generally speaking, making more money seems to make it easier to throw away more. A study found that people were three times more likely to have money.
Here’s a breakdown by income level of respondents who said they have an emergency fund:
- If your income is less than $50,000: twenty four%
- Income between $50,000 and $99,999: 49%
- Income over $100,000: 72%
Top-income earners were also more likely to report having more emergency funds, with only 17% of those earning less than $50,000 a year compared with those earning $100,000 or more and having no emergency funds. 57% of those who have a fund of $20,000 or more.
Only 8% of respondents who said they had emergency funds reported less than $1,000.
If 3-6 months of spending doesn’t seem right, start small. A LendingClub study last year found that the average emergency costs about $1,400.
Here are some tips to get you started.
1. Know your income and expenses
If you’re not currently tracking your income and expenses, start now. You may find yourself wasting money on unused subscriptions and impulsive Amazon purchases, but you can trim them to put money in a emergency fund.
2. Move forward with unexpected cash
Did you get a tax refund this year? Tax refunds, gifts, annual bonuses, and other cash windfalls are great ways to quickly build emergency savings.
If you don’t need the extra cash to meet immediate needs like groceries or living expenses, keep it in a high-yield savings account and avoid using it unless it’s an absolute emergency.
3. Automate your savings
One of the easiest ways to build emergency savings over time is to set it and forget it. Calculate how much money you can afford from your paycheck and set up direct deposits in your savings account to automatically start saving every time you get paid.
Invisible money is hard to spend, so keep it separate from your regular checking account and other spending accounts.
Don’t Miss: Want to be smarter and more successful with your money, work, and life? Sign up for our new newsletter!
check out: 6 Signs You Have Too Much Debt and How to Pay It Off
