Do you feel well-prepared to address a financial emergency? In early 2018, CNBC reported fewer than four in every 10 households in the United States possessed the fiscal resources required to cover the cost of an unplanned $1,000 expenditure.1 Most people in the USA do not place funds into a savings account on a regular basis. Individuals and families alike are urged to begin accumulating emergency funds in the case of unforeseen crises.
Saving for Unexpected Emergencies: An Important Concern
Many unexpected events can trigger a household financial crisis. A family provider might suddenly lose a job or face an expensive transfer to another location. A child may develop a sudden illness and require costly diagnostic procedures. A winter storm may topple a tree onto the family cars, costing thousands of dollars in unexpected bills. A landlord might decline to re-lease an apartment, leaving a tenant in dire need of a security deposit for a new rental. All of these common yet unpredictable events can impose immediate demands upon personal finances.
Cash Flow Counts
Financial experts indicate cash flow issues matter enormously when financial crises arise. Households without savings may find themselves unable to raise funds to deal with these types of emergencies. Although loans can be quick to obtain, they still leave you with a large balance that needs to be repaid. The situation is especially difficult if a prospective borrower already carries a heavy burden of debt.
In order to prevent an unplanned significant expense from ballooning into a financial calamity, households need to engage in advanced planning. Although it may seem unimportant when life is going smoothly, it will be helpful in times of emergency. From personal injury to automotive repairs, you can rest assured knowing that you have a reserve of cash on hand in order to address the financial challenge!
Implement a Long-Term Savings Strategy
Several smart strategies exist for creating a fund to pay for household emergencies. The extra money can provide security if and when a problem arises. Consider implementing one (or all) of these approaches:
- Pursue a part-time job or investment and using the proceeds to accumulate a “rainy day” fund;
- Regularly allocate 3% to 10% of your current pay check for this purpose;
- Obtain a short-term installment loan to serve as an initial “nest egg” to cover unforeseen household emergencies.
Careful Planning Yields Benefits
No one knows with certainty when a financial crisis will arise. The time you take now to prepare for this type of event may yield big rewards in the future. An emergency savings fund often helps people satisfy the demands imposed by sudden large expenses. The money you accumulate in this way will assist your household!
Proceeds generated by a part-time second job or investment enable some borrowers to obtain short term loans rapidly to handle emergencies. Lenders appreciate the prudence of householders who regularly secure money “for a rainy day”. By developing a fund to help handle household emergencies, you’ll arm yourself with a powerful resource!