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8 reasons to build emergency savings



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Tanisha A. Sykes

It’s always worth it to make sure your emergency savings are up to snuff, with experts recommending three to six months’ worth of living expenses set aside, or even more, depending on your personal situation.

Many of us would struggle if we were in a pinch. A Bankrate poll released in January 2020 showed that just four in 10 U.S. adults could cover the cost of a $1,000 car repair or hospital stay with savings. That’s why it’s more important than ever to save.

But there are many reasons why you need to fund your emergency savings. Here are eight.

To give you peace of mind

For a long time, Sherry Andrew and her husband, Jason Wilker, had no emergency fund. Then she lost her job in 2017.

“That completely changed the way we managed our finances,” says Andrew, a 41-year-old financial coach in Ontario. When she returned to work, she deposited all of her income into an emergency savings account while her husband’s income covered necessities. In just over a year, they saved enough to cover six months of expenses.

“It makes us feel secure knowing that if we both had zero income for months, we would still be okay,” she says.

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To stave off debt 

Carrying a balance of $15,000 on a credit card that charges 20% interest could mean paying $3,000 in interest over a two-year period. Emergency funds can act as a financial buffer during a time of need instead of having to rely on credit cards or secure high-interest loans.

To keep a roof over your head

Owning a home accounts for about 34% of take-home pay, according to data from the Bureau of Labor Statistics for the 12 months ending June 2018. It’s not just the mortgage payment to consider. “If you own a home, it’s critical to have an emergency fund for repairs and other associated homeownership costs,” says Anthony Copeman, a certified financial education instructor in New York.



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