KNOXVILLE (WATE) – Emergencies, by their nature, are unpredictable. When they happen, they can derail your financial stability. A new survey shows that a large number of Americans are unprepared, should an emergency arise.
Suzanne from Lenoir City asks: “In case of an emergency, how many months worth of expenses should put away?”
While emergencies can’t always be avoided, having an emergency savings can take some of the financial sting out of dealing with unexpected events like a sudden illness, accident, or unexpected job loss.
The general rule of thumb is have six months worth of expenses put away in a separate savings or bank account used to cover or offset the expense of an unforeseen situation.
However, a survey just released this week shows 26 percent of Americans, just over one in four, have no emergency savings.
The Bankrate.com report shows 67 percent have saved less than the recommended six month’s worth of expenses and 50 percent of Americans have saved less than three months’ expenses.
Even among the highest income households, those with an annual income of $75,000 and above, fewer than half, 46 percent, currently have a six month savings cushion.
Among different age groups, people between the ages of 30 and 49 are more likely to than any other age group to have no emergency savings.
The reason, according to financial experts, is ages 30 to 49 are considered the high spending years when expenses often rise faster than emergency savings can keep up.
Those between the ages of 18 and 30 are more likely to have up to five months’ worth of expenses saved up, mainly because many of those under the age of 30 have the benefit of lower expenses due to roommates, living with parents, or being a student.
Having three to six months’ worth of expense put away can seem daunting at first, but the idea is to put a small amount away each week or two to build up to that goal.