Yes, the economy is booming – and yes, the United States is dealing with a record-low unemployment rate right now; however, despite all this, a recent study revealed that a mere 43 percent of Americans are confident that they are “prepared” for a $2,000 emergency expense. This was revealed by a study conducted via the FINRA Investor Education Foundation.
Still, Finra explains that less than half of those surveyed stated they could handle a financial unexpected expense, which is good news when compared to 2012, when only 35 percent of participants stated they were confident about a $2,000 bill they weren’t planning for.
FINRA Foundation pooled 30,000 people, and also discovered that close to 50 percent of Americans still do not have an emergency savings account.
With that said, while some may think digging into credit card debt or retirement savings if an emergency popped up as “prepared”, these actions have dire financial consequences long term, as there are many who simply find they do not have enough money for their retirement years, and those who may feel like they are suffocating in debt.
What’s the solution? Work on an emergency savings fund! The sooner you get this going, the better off you will be!
The first step around all this is opening a separate account from your current checkings (where all the money goes in and out of), and setting aside an allotted amount each week, bi-week, or month; whatever works best for you. It can be as little as $10 per week, or as high as your monthly budget can afford. Look into setting up an automated payment where the money is simply withdrawn by the bank on a set day, and this will eliminate any additional work (or remembering) from your end!
While it may seem like a small amount at first, hold on to the thought that weeks and months of saving will turn it into something substantial over time so that when that unexpected expense pops up, you can turn to your emergency fund versus credit or retirement savings.
Scott Hastings is a CPA with over a decade experience in finance. He started his career in audit with PwC and is excited to bring that knowledge to RM Credit Cards.