According to CBS, 40% of Americans have less than a mere $500 in “readily accessible savings”. Folks, many Americans are living on the financial redline, and when unexpected expenses come up, they end up pulling out the credit card and setting themselves back financially even more.
Check out the following from CBS:
A survey of about 1,100 Americans finds that more than 4-in-10 respondents admit they don’t have more than $500 in readily accessible savings.
The survey is a kind of departure for CreditDonkey.com, a website that compares credit card deals. Not respondents all were poor. Some had big houses, big mortgages or 401(k)s, but still no more than five Benjamins to rub together right now.
It’s interesting that not all of the respondents to the survey were poor; apparently people who are relatively well-off even have limited accessible cash on hand.
An Emergency Fund is Super Important
I’ve learned through hard experience that it’s super important to have a emergency fund of at least 3 to 6 months of living expenses sitting in the bank. And I’m not talking about an emergency “fund” such as a credit card or credit line, I’m talking about actual cash in the bank that you can tap when unexpected things come up.
It takes far more time to get out of debt than get in it, so if you’re borrowing to cover emergency expenses, you’re setting yourself back financially and making it that much harder to keep up with bills. When you borrow to cover an unexpected car repair, root canal, or appliance replacement, you end up spending months or years paying it back – and you still have no cash on hand to cover the next thing that breaks. You end up constantly trying to catch up with the bills and get ahead.
If You Don’t Have One, Get One Set Up ASAP
If you don’t have an emergency fund, start saving now for one. Cut expenses, sell stuff, take on some extra hours – whatever you need to do so you can put some cash away and have the peace of mind of knowing that you have cash in the bank. It’s inevitable that unexpected expenses will arise, so are they really that “unexpected”? Isn’t it a good idea to plan for what you know will come up at some point?