17 Feb Are You One of the Many Americans Without an Emergency Fund? Here’s How to Change That
There are plenty of reasons you may want to sell a structured settlement, lottery winnings, or annuity payments, but perhaps the most important is that emergency situations that can arise at any time. Most experts suggest having at least three to six months worth of living expenses saved up in an emergency fund, but unfortunately, this isn’t always feasible.
Many consumers don’t realize that determining how much money to set aside for emergencies is more of a moving target. Almost one-third of Americans are still struggling to set aside anything, with 29% reporting they have no emergency savings to a Bankrate.com survey. That’s an increase from 2014 when the number stood at 26% and is, in fact, the highest rate in five years of queries.
Of the 1,000 adults surveyed by Bankrate.com, only 22% said they had enough money in savings to cover expenses for six months, which is another five-year low. In addition, just 15% said they have savings equivalent to three to five months, and 21% can cover fewer than three months.
So what can you do to make sure you’re covered?
- Start your emergency fund. One of the best ways to get started on this important life asset is to set a more than feasible goal and stick to it. Start out with an initial goal of having $250 to $500 in an emergency fund. That should be a reasonable amount to achieve in just a few months (maybe less depending, on your income situation) and yet can make a big difference in the event of an emergency.
- Contribute a small amount to the fund each week. The next step to actually achieving this goal is to break it down into pieces. Start by saving something like $25 a week. By doing that you’ll have a $250 emergency fund built up in just 10 weeks. Putting away $40 a week would bring you to the $500 goal in just three months time.
- Reduce or eliminate your debt. This kind of money-saving plan is great for helping you get out of debt, too. Once you’ve built up $1,000 in your emergency fund, you can redirect your efforts towards eliminating any debt you might have. Then, once you’re debt-free, you can get back to building your emergency fund further.