A recent survey conducted by the financial website Bankrate.com claims 57 percent of Americans do not have enough money to cover a $500 emergency. Research from last year published by the Federal Reserve came to a similar conclusion. According to the Federal Reserve, which polled more than 5,600 Americans, 46 percent claimed they would have difficulty paying for a $400 emergency expense. As a result, car repairs, medical bills or unexpected illnesses push people to take on more debt. Saving for an emergency fund may help prevent these costs from turning into a financial nightmare.
Saving for an Emergency Fund Requires Flexibility, But There Are Constants
There are several ways to build an emergency fund. However, it is important to understand there is no “best way” to save for emergencies because people have varying financial situations. The trick is finding what works best for your individual situation and adapting. That said, these basic suggestions should apply to most people:
- When you receive extra money, such as from a gift or tax return, put some of it towards your emergency fund. If you do not have an emergency fund set up already, this is a great way to get started.
- Cut back on unnecessary costs. Buy cheaper food, eat out less, stop going to Starbucks every morning, walk or carpool to work.
- Save your change and small bills. It adds up over time. Keep the small domination bills, quarters, dimes and nickels handed back to you each week.
- Set flexible savings goals each month. This goal should change based on your anticipation of expected costs (doctor’s appointments and travel are examples).
Saving money for an emergency will not happen overnight. The point is to gradually contribute to a fund that can help you pay for emergencies. This will take patience and dedication, but it will also help keep a minor financial emergency from turning into a major one.
The Kansas City bankruptcy attorneys at The Sader Law Firm are dedicated to helping people find solutions for resolving difficult financial situations.