Key Takeaways
- Many Americans don’t have enough to cover a $400 emergency.
- If you don’t have an emergency fund, there’s a simple way to get one started.
- Think of your emergency savings as a subscription program that you pay every month.
A survey conducted by the Federal Reserve Study revealed that 41% of Americans don’t have $400 to cover an emergency. That’s pretty bleak, but it’s also been the case for many years, where a single emergency can cause some serious financial turmoil for those without the savings to cover it.
If you find yourself in this category of not having at least $400 in an emergency fund, there’s a simple way to change that. (Now, ideally, you’ll have closer to three months’ worth of expenses in your emergency fund, but the important thing is to get one started, and build it up as you go.) Start by looking at your emergency savings like a subscription program.
Chances are, you have at least one subscription where you automatically pay a set amount each month. It’s probably linked to a credit card and, after initially setting it up, you likely haven’t had to do anything else to send your payments. It’s set-it-and-forget-it.
Well, this can work for getting you on track with an emergency fund too. Start off by opening a savings account where you have your checking account. Then start an automatic transfer of $19.95, $29.95, or $39.95 to go into that savings account from your checking account each month.
At $19.95 per month, you’ll have almost $240 after one year; at $29.95, almost $360, and at $39.95, almost $500. Slowly but surely, month by month, this will build up, and after a year or two, you’ll at least have the start of a savings account that can be tapped for emergencies.
This is important because, should you encounter an emergency, you won’t have to put it on a credit card, which may charge 21% or so in interest.
So try this little trick and subscribe to your emergency fund – it’ll be one of the most worthwhile subscriptions you have! Until next time, enjoy.
If you’d like to read more on this topic, here are a few of Gary’s previous posts that you might enjoy:
