In a survey of 1,000 adults, Bankrate found that 28 per cent of Americans haven’t saved a thing for financial emergencies.
Generally, your emergency fund should cover at least six months’ worth of living expenses. However, the survey showed that 49 per cent of people don’t even have enough set aside for three months.
This sounds bad, but compared to a similar survey Bankrate did in 2006 things have actually improved. Six years ago, an overwhelming 61 per cent of Americans didn’t have three months worth of savings set aside.
“While we’ve seen some improvement since then, the bottom line is that much more progress is needed,” said Greg McBride, CFA, senior financial analyst for Bankrate.com.
For those who are used to living check-to-check, beginning to build an emergency fund can be daunting, but it isn’t impossible. Here are a few things you can do to get the ball rolling:
Create a budget. Determine how much money you spend each month on basics like utilities, food, rent, gas and insurance. Multiply this number by six and you’ll know how much you want to save, reports YM contributor Rachel Koning Beals.
Use automatic transfers. YM contributor Trent Hamm admits that even though he always tells people how important an emergency fund is, if he was forced to go to the bank every week to put money in savings he’d probably fail within a month. He suggests setting up an automatic transfer that will move money into your savings account every week.
Remember, little things add up. Just by setting aside $20 a week for your emergency fund, you will have over $1,000 saved after one year, Hamm points out.
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