Did you know that most of Americans don't have enough savings to handle a $1,000 emergency?
I know we don't like to think about it, but what's going to happen if your car breaks down or you lose your job? It's important to plan for the unexpected.
There are several questions around a savings fund.
1. What counts as an emergency?
2. Where do you start?
3. How much should you save?
Take a look below for some answers
- Your car needs a new battery
- Your furnace breaks in cold weather
- Your fridge needs a repair
- You're admitted to the emergency room
NOT AN EMERGENCY
- A last minute birthday gift
- A new TV because yours broke
- A new cell phone
Where to start and how much to save
Young and/or starting your career: 1 month of living expenses
As you grow your savings: 3 to 6 months of living expenses
Ultimate goal: 12 months of living expenses
Now to your savings options! When you're deciding where to keep your savings, there are some things to keep in mind. Here are some options:
A checking's account is a good start since they have low fees and quick withdrawals. However, because you can easily access your money in a checking account, it might not be the best option for people who might still need a bit more help with money management. It is also not the best for long-term.
Generally, you can withdraw money from your saving's account up to 6 times a month. Interest rates are higher, fees are low and there is quick withdrawal. Because it is not convenient to use your savings account for day-to-day purchases and there is a limit to withdrawals, a savings account is a good option!
Certificates of Deposit
A certificate of deposit can be purchased from a bank, which will return your funds with interest after a fixed term, such as several months or years. Their interest rates are higher than those of a savings account, but if you were to withdraw your money before the set date, you would be charged penalty fees.
Another place for your savings is a prepaid card. With this method, you would be putting money into a prepaid card through direct deposit, cash or checks. However, alike a checking account, it is very easy to use a prepaid card. Withdrawals are quick and there are no penalties. While this is a good option, keep in mind you must manage it wisely and strictly!
Tips to Save More
Track your income
Track your expenses and budget wisely
Figure out your needs and plan accordingly
Make a habit of saving- every cent counts!
Limit your spending
Hope this helps!
I know I said most Americans don't have enough for a $1,000 emergency, but let's change that! It starts with you, and I believe in you!