Saving is an important financial goal, but many people put off their savings goals because they lack enough extra income. Do you have enough savings to be prepared for potential job loss or other life changes that may occur? A recent Consumer Financial Protection Bureau study found that only about 1 in 4 Americans could cover more than six months of living expenses if they lost their main source of income. This isn’t good news.
Many Americans lack emergency savings
The Consumer Financial Protection Bureau conducted its Making Ends Meet 2022 survey to explore consumer financial health throughout the country. One portion of the study examined whether Americans had the financial means to cover their living expenses if they lost their primary source of income.
Respondents were asked to consider multiple ways of covering their expenses, such as borrowing money, using savings, selling assets, or seeking help from friends or family. It turns out that many Americans are not well prepared for life-changing situations such as job loss.
Here are some notable findings of the study:
- 21% would be able to cover less than two weeks’ worth of living expenses
- 17% would be able to cover about one month of living expenses
- 15% would be able to cover about two months of living expenses
- 27% would be able to cover more than six months of living expenses
These findings show that many Americans could do more to prepare for emergencies. How long would you be able to cover your expenses if you were to lose your job or experience another significant life change that altered your financial situation?
Start building an emergency fund now
With the rising cost of everyday expenses, it’s no surprise that U.S. households are struggling to prioritize saving for emergencies. Many individuals and families are focused on the now and are stuck living paycheck to paycheck. There’s little or no extra money to save.
But saving for emergencies is essential, even if you can only commit to a small savings goal. Emergencies happen when we least expect them, and they can be life-changing. If you have yet to start an emergency fund, now is a good time to begin.
Opening a high-yield savings account and setting aside a small amount of money regularly will make a difference and get you well on your way to building a sizable emergency fund. Over time, your savings account balance will grow. Plus, you can earn interest.
You don’t want to keep your savings in a checking account because you won’t earn interest. If you don’t have a savings account, review our list of the best high-yield savings accounts to find an account that meets your needs.
Automate your savings to save time and stay on track
Many people want to save but find that life gets busy, and they forget to do it. You may want to automate your savings if you relate to this struggle. You can set up automatic transfers through your bank to automatically transfer money from your checking account to your savings account. You can decide how much and how often you save.
Life is expensive, and it gets busy. But don’t neglect planning for the future. You want to feel confident that you have a plan for life’s twists and turns. Check out our personal finance resources if you need additional money-saving guidance.
