by Stephanie Berenbaum – May 25, 2011
Maybe you’ve been saving up for that trip to Peru, or perhaps you have your more practical eye on a new stainless steel refrigerator? But the real question is: how much do you have saved in your EMERGENCY FUND? Or, be honest – do you even have one?
What the Experts Say
Most personal finance experts recommend having three to six months of your monthly expenses stashed away – not to be touched…in case of emergency. But do the majority of Americans have that kind of money set aside? Or are we spending our safety nets before the money even hits the bank?
What the Studies Show…
A new study by the National Bureau of Economic Research set out to answer the question: how many Americans could come up with $2000 in 30 days if they had an emergency? And the shocking result – nearly HALF of Americans would have trouble coming up with that kind of dough in 30 days – and it’s not just folks in the lower income brackets.
A surprising number of middle class families also reported that they do not have an emergency fund set aside, and coming up with two grand would be a REAL struggle. –Keep in mind, that the study did not ask how many people had the $2,000 neatly tucked away in a savings account. It asked how many people could GET the money in 30 days – including borrowing the money, selling items to raise money, etc….
Of course there is ongoing debate about what “middle class” really means. The study found that a quarter of households making $100,000-$150,000 per year felt they could not come up with an extra $2000 in 30 days. At first I found this truly mind blowing — but the more I thought about it, the more it occurred to me that maybe this is just a by-product of all the seemingly middle class people driving luxury cars and living in huge homes – and living WAY ABOVE THEIR MEANS! If you are making that kind of money, but have no wiggle room to save – something is amiss…
3 Ways to Start an Emergency Fund ASAP!
Pay Yourself First
Go to your bank and open up a money market or savings account where you can earn the most interest possible on the money you save. Even if you can only contribute $10 a week into your savings account, DO IT. That’s $40 more a month than you were saving before!
Rethink Your Rebate
If you are still waiting for your tax rebate, use this money to start or add to your emergency fund!
Get Rid of Your Credit Card Debt
Focus on eliminating your credit card debt by tackling the debt with highest interest rate first. While it may take some effort and a little bit of sacrifice, if you can completely eliminate one interest payment alone, you could free up that money you are spending on payments and redirect it into your emergency savings!
What About You?
So, Fab & Fru wants to know – how many of you could easily come up with $2000? How many of you have 3 months – at least – of emergency savings in the bank? Would you use your tax refund to start an emergency fund? Let us know what you would do!| Print