How Much You Should Have in an Emergency Fund

I want to know if you were to get hit with a sudden curveball in your life your vehicle needs a repair the water heater goes out at your house AC goes out uh surprise somebody gets sick and you have a medical bill you weren't anticipating whatever it is where you have a need for your rainy day account because you know financially there's always going to be times that it's raining and so how are you prepared well bank rate forever has done an annual survey and found that the number of people who can handle that Financial oops stays typically in the 40 some odd percent of Americans that if they got hit with a surprise in their different surveys there's another organization does one could you handle a four hundred dollar surprise expense bank rate does a thousand and so again in their survey uh not quite half a little less than half of people could handle that unexpected emergency the number of people though who are really wheezing financially has been rising because We As Americans and I've talked about this as long as I've uh I've done this all the way back to the 1980s we in the United States do not save culturally or cultural makeup we don't save like people do in other cultures and recently Americans have been saving a very very small amount of their pay part of that is recent inflationary pressure in the economy but outside of people who are living truly paycheck to paycheck it is cultural because people in countries where people don't make nearly what we make and don't have the standard of living we do they save so often a third of what they make in the United States we usually are saving somewhere around five cents to six cents of every dollar we make tiny compared to other cultures we have always been uh Here and Now enjoy it today because you don't know what tomorrow will bring and I look at it the opposite I look at it more like other cultures that we don't know what tomorrow is going to bring and a lot of times it's going to bring an oops of some kind and we need to be prepared for it but the fact is a lot of us in the United States it's just not we're not wired that way so how do we pay for that emergency we use credit cards or payday loans or something like that I mean one in four people are willing to admit to pollsters that's how they'd handle an emergency so you know it's actually higher than that but that's the percent that will admit oh yeah I just pull out the card and then you're paying the highest interest rates on average we've ever had on credit cards right now so I ask you to do something and that is if you are listening me and you know you couldn't handle that oops because oops happen they happen I'd like you to start saving something every paycheck let's keep it simple 10 bucks a paycheck goes into a savings account with an online bank and your employer probably allows split deposits of direct deposit where you can have money go into your regular checking account wherever you do your Banking and then you have an amount you divert into a savings account with an online bank or it could be a credit union not at a regular Bank and then you could have that money steadily build up over time and build up that rainy day account so that when the rain comes you're not having to borrow it 20 percent more or less interest you have the money you've put aside that helps you deal with that rainy day this is completely up to you how you choose to have your finances done but I ask you to think it through in your past something happens something you don't expect happens how do you deal with it and being prepared to deal with that unexpected makes dealing with the aftermath of the unexpected so much easier for your wallet

Channel: Clark Howard: Save More, Spend Less

Views: 8,899

Keywords: clark howard, clark, money, financial literacy, finances, money podcast, podcast, financial podcast, consumer, consumer advocate

Id: OJKpNWUJmwM

Length: 5min 13sec (313 seconds)

Published: Sun Mar 05 2023