The importance of emergency savings
Use these tips to start saving for emergencies.
Have you ever had to deal with an emergency and needed access to cash? Were you able to obtain funds from an emergency savings account? Twenty-six percent of Americans have no emergency savings and are financially unprepared to deal with emergencies. If emergency savings have not been established, we are forced to borrow from others, use credit cards, spend money allocated for other bills, or suffer the consequences. Having money saved for unforeseen crisis situations improve the likelihood of surviving these life events.
Experts recommend that emergency savings should equal three to six months worth of living expenses. This amount may seem unattainable in the beginning. Think of it as a goal that can be reached over time instead of trying to accomplish it in one giant step. Use these tips to get started:
- Calculate the total amount needed by your family to survive for three to six months.
- Review your budget to see if there are any candidates for reduction or elimination. Add these funds to your savings.
- Figure out where you are going to keep this reserve. Put it in a place that is accessible and safe.
- Do not save it in an account that charges a maintenance fee.
- Be disciplined and do not spend this cash for anything other than emergencies.
- Prioritize saving! Add money to the emergency account, no matter how small the amount.
- Continue to add money when bills are paid off or reduced, or if there is a pay increase.
- Have the money automatically deducted from you paycheck or checking account BEFORE you can touch it.
Michigan State University Extension educators want to reiterate the importance of emergency savings. Being financially capable of handling an emergency when it arises helps reduce a stressful situation. Please visit the MI money health webpage to learn more money management information that can strengthen a family’s financial future.