Considering the major financial crisis America has experienced, it is not a surprise that more Americans want to be prepared for financial emergencies. Recent studies have indicated that more Americans choose to save, just in case financial trouble hits again.
24% of Americans Have No Emergency Savings
Based on the recent Bankrate study, 24% of adults have no money set aside for financial emergencies such as losing their job or medical bills. Even though this may seem like a considerable amount, it is actually the lowest percentage since the poll started in 2011.
Only 31% Are Prepared for Financial Emergencies
Despite the 24% who are not prepared for financial emergencies, 31% of interviewed Americans have enough savings to survive a major financial emergency. Again, this is the highest percentage in seven years! Bankrate’s survey finds 1 in 5 adults has some savings but not enough to pay the bills for the three-month minimum.
Still Many Americans Not Financially Prepared
Despite the large increase in Americans putting some savings aside, studies also show that approximately a quarter of the American population are still not prepared for financial emergencies. Despite the 31% who are prepared, the study also showed that two-thirds of Americans don’t have the savings they would actually need in an emergency situation.
How Much Do You Need to Be Prepared?
One thing many Americans wonder is how much they need to save to be prepared. Well, this is different for everyone, because it depends on your living expenses.
Financial experts recommend having enough savings to cover at least three months of living expenses; this includes stuff such as rent, mortgage repayments, utility bills, grocery costs and similar expenses. However, financial experts do say that having enough to cover six months is ideal. Therefore, six months is the goal all Americans should aim to achieve.
Baby Boomers Are Struggling
While there is a greater percentage of boomers who have 6+months of savings, more than a quarter of them have no savings at all. This could be especially difficult as job prospects, healthcare and other factors could make it more difficult to save.
How Do I Save Effectively?
To ensure you reach the three month or six month target, it is best to put any money you save in a high-yield savings account or a money market account. These types of saving yield higher returns, which means you could reach your target sooner.
Secondly, it is also essential to resist temptation of spending extra money immediately. You may get a bonus at work or some money back on taxes, but most people spend it on a home upgrade or a car upgrade. Unfortunately, this does not help you prepare for financial emergencies. Therefore, it is better to put this extra money in your savings account.
Once you have reached your six month target, nothing is stopping you from spending some extra money on your home or your family. However, saving more money down the line or putting some cash in an investment can make the difference for your financial security in the long run. Therefore, never consider yourself finished where saving is concerned.
There is much to consider when it comes to savings. Even though many Americans are now better prepared for financial emergencies, there is still a large portion of Americans who could get in serious trouble when a financial emergency occurs. Therefore, be smart with your financial future and ensure you have some savings in place when unforeseen circumstances arise.