Not having money saved away in case of an emergency is a bonafide recipe for a financial disaster.
A recent study by the good people at Bankrate found only about four out of ten people said they could cover a $1,000 unexpected expense with money in savings.
That means that six out of ten people don’t have even $1,000 to turn to in an emergency.
Most days I’m worried about people having enough money saved towards retirement. Not having access to $1,000 for an unexpected financial crisis is much more alarming.
When people can’t turn to saved cash for an emergency it often lands on a credit card, loan, or borrowing from friends or family.
All those options increase debt and move the expense you can’t afford from the emergency to another place.
That’s not a solution.
A report from the Federal Reserve in 2017 found an even scarier fact. “More broadly, 44 percent of all respondents could not cover an unexpected $400 emergency expense or would rely on borrowing or selling something to do so. The survey also shows that many adults have no savings for retirement,” said Federal Reserve Board Governor Lael Brainard.
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I soiled my pants.
Debt problems are the result of so many issues but not having money to pay for a blown engine, new tires, or a leaky water heater is what can sink the finances of the majority of American’s. That scares the hell out of me.
The Federal Reserve Board results come from their Survey of Household Economics and Decisionmaking which they actually call the SHED.
The shed is exactly where people should go who don’t have an adequate savings account to tap in an emergency.
I’m not sure I have any gentle or kind words to help you take action if you don’t have at least $1,000 in savings. You need to have emergency savings because accidents and unexpected expenses happen.
Without some money to use in an emergency you will wind up borrowing the money from someone, someplace, or some lender.
If you borrow from a credit card or payday lender, you are going to pay out the butt and that $1,000 surprise can turn into an easy payment $3,000 debt.
Did you see what happened there? The lack of savings caused you to borrow and repay much more than the $1,000 you needed and robbed you of $2,000 you could have added to that savings account you need.