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Emergency funds: Saving for hardships

Posted at 11:48 AM, Jan 21, 2019
and last updated 2019-01-21 14:56:35-05

Even if you’re not directly affected by the government shutdown, there’s something we all can learn about financial emergencies.

Among the stories about furloughed federal workers coping with the government shutdown, Chris Greer’s story stands out because of what he’s been doing for years.

“I do have a little bit of an emergency reserve fund that we have saved as a family,” Greer says.

Sadly, he’s the exception, not the rule, according to a new Bankrate.com survey about American workers with no emergency savings account.

“Only 40 percent of Americans could pay an unplanned expense of a thousand dollars out of their savings,” says Bankrate.com senior analyst Greg McBride.

McBride says the average financial emergency costs about $3,700, and makes the argument to at least start an emergency savings account.

“The critical action step is setting up that direct deposit from your paycheck into a dedicated savings account,” he advises.

If you have little or no emergency savings, there are a couple of very important don’ts.

“Don’t automatically go to your credit cards. Don’t turn to the payday lenders,” says Lynnette Khalfani-Cox, “The Money Coach.”

Khalfani-Cox says don’t try to borrow yourself out of debt, but do adjust to a more frugal lifestyle and ask creditors for patience.

“You might need to get some loan deferments. You might need to be able to negotiate to make smaller minimum payments,” she says.

You might also need professional help from non-profit agencies that she says deal with debt in both good times and bad.