Life has an uncanny way of hitting you with the unexpected at the most inopportune times. That’s why having an emergency fund is vital for when disaster strikes. Here’s why having money set aside is important and how you can start saving if you haven’t already done so.
Why is an emergency fund necessary?
According to a recent survey by Bankrate, 63 percent of Americans haven’t saved enough to handle an emergency that costs as little as $500. So why should you put away extra funds if no one else has them?
Whether it’s a destroyed smartphone, a totaled car or unforeseen medical costs, unpredictable life events can set you back hundreds to thousands of dollars if you’re not prepared. Experts advise putting aside at least three to six months’ worth of living expenses and twice that amount if the current economy is experiencing a crisis.
Is it too late to start saving?
If you don’t have any money for an emergency fund, you can still start to take steps in the right direction. Here are some ways to kick-start your savings:
- Instead of spending your next tax refund, immediately deposit it into a bank account that generates interest.
- Consider revising your W-4 so less money is withheld from your paycheck each month, and put the extra funds in your savings account.
- Earn side income by tutoring, doing seasonal jobs or selling items that won’t be missed around the house.
Even if nothing happens, which is hopefully the case, just knowing you have the necessary funds on hand to deal with an emergency will give you a little extra peace of mind.