A recent New York Times article laments that most families lack enough savings for emergencies. We all grew up hearing that it was good sense to “put something away for a rainy day.” Do you know how much that should be in reality? Some financial advisors say 6 weeks and some say 6 months! The recommendation from JP Morgan Chase Research Institute is 6 weeks of take home pay. How close are you to that number? Would you be comfortable if you experienced a sudden dip in income and a simultaneous jump in expenses?

The Pew Charitable Trusts point out that American’s lack of emergency savings has been of concern for years. The Federal Reserve estimates that a significant share of households would struggle to cope with an unexpected $400 expense; the average amount of delinquent accounts in collections is about $400.

The AARP Public Policy Institute found that more than half of American households lacked an emergency savings account, especially those folks over 50 years of age. You would assume that it would be easy for the more affluent to save, but the same research revealed 25% of Americans earning $150,000 annually have no savings account.

So in light of all this – how can you be sure you and your loved ones are protected? It is not always practical to borrow from family or friends when you have major home repairs, need your car fixed, or have a health emergency. We suggest the following for future financial wellness in the event of an emergency:

• Have a fixed amount from each paycheck automatically transferred to a savings account set aside specially for emergencies.

• When you experience a spike in income – a tax refund, an unexpected bonus, holiday pay, commissions, etc., put some away.

• Be flexible – if you can’t make it one month, make up for it the next

• Start small – shoot for $500, $750 if you can and build it from there. If you draw down the account, replenish ASAP.

• Keep your emergency funds where you can access them quickly, like a good money market account or a high interest savings account.

• If you are still struggling, try one of the new money saving apps to automatically save small amounts: https://www.nerdwallet.com/blog/banking/best-money-saving-apps/

 

CONTACT US: Although it may seem like a sacrifice, an emergency fund will give you peace of mind and make emergency situations less stressful. You can focus on fixing the problem instead of finances in a true crisis. No matter what your age, having an emergency fund makes good sense. TFG can help you get started. We invest the time to educate clients about financial options to meet their needs and work with them on defining their goals. We want you to make informed decisions. Feel free to contact me, Cory Lyon, directly at 561-209-1120, with any questions. I act as a fiduciary for all my clients.

TFG Financial Advisors, LLC is a registered investment advisor. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any securities, and past performance is not indicative of future results. Investments involve risk and are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed here.