A new survey conducted by The National Foundation for Credit Counseling (NFCC) found that a whopping 64 percent of Americans don’t have $1,000 in their savings accounts to cover emergency expenses. These individuals said they would unfortunately have to turn to an outside source to ask for money if an unexpected expense popped up.
Americans Must Turn to Others for Emergency Funds
The NFCC study surveyed 2,700 Americans to determine how much money they had set aside in the event of a financial emergency that cost $1,000. Of that population surveyed, only 36 percent said they would be able to turn to their savings to pay for the expense.
The majority said they would have to consider the following options:
- Take out a loan: 9 percent
- Borrow from friends or family: 17 percent
- Take out a cash advance on a credit card: 9 percent
- Disregard other monthly expenses: 17 percent
- Sell or pawn assets: 12 percent
Though some have questioned the validity of the study, hinting it may have been a bit biased in selecting its sample pool, the fact that such a high number of participants are lacking $1,000 in savings is still alarming and is something that should be addressed.
Saving Enough Money for Emergencies
So how do you go about setting aside enough for emergencies? The best way is to take the initiative to establish an emergency fund. It may seem difficult to create one with so many bills to pay, but with a small amount of effort on your part, you’d be surprised by how much you can save.
- Define your emergency: It’s a great idea to come up with a list of potential emergencies (car breakdowns, medical expenses, insurance deductibles, etc.) to give you an idea of how much you need to save. Doing this also ensures you don’t pull the money out prematurely for and expense that isn’t really an emergency.
- Open a savings account: Next, open a special savings account with lower liquidity. This way, you have designated an account for your emergency money and have granted yourself little access to it once you’ve started saving.
- Have money directly deposited: You can set up direct deposits so that some of your paycheck is automatically deposited into this special account. This way, you won’t even notice it’s been taken out.
- Cut expenses: If you feel you don’t have enough income left over to save, take a good look at daily expenses like eating out for lunch or magazine subscriptions to see what can be cut. You’d be surprised by how giving up these two expenses alone could free up $100 a month.
There’s nothing that feels as good as having a cushion set aside for emergencies. So whatever you do, don’t stop setting money aside for emergencies and don’t dip into the fund unless a real emergency arises. This way, you will always feel prepared for the worst.