This week bankrate.com released study numbers via Twitter that many have know for sometime – very few have an adequate emergency fund. In their tweet they shared that only 24% of American homes have a true emergency fund to protect them if financial storms hit. In that tweet their definition of an emergency fund is enough money to cover six months worth of living expenses.
I am not sure who or how many they studied, but my experience shows that number to be less than the 24%. So many today are struggling to keep up with their commitments that they do not have the money, they believe, to have an emergency fund. Still many refuse to accept that they will need one and I often see that stance in young adults. You know you have a risk, but you are not taking steps to mitigate that risk.
Having an emergency fund in place does not protect you from experiencing the emergencies, but it does protect you from the tremendous financial strain when they do hit.
Most of America has an emergency fund, but it is not in the form of liquid cash. Most of America is relying on a credit card(s) or the help of someone else.
Currently, I have clients who have recently lost their jobs. Most would agree that is an emergency. It is interesting to see the approach, the reduced stress and anxiety of those who have an emergency fund versus those who do not. In addition, those who have worked hard to build their emergency fund balance are often those who work aggressively to protect it by making the tough decisions quickly and not waiting until all else has failed.
Where are you? Are you in the 24% or in the 76%? What peace do you find in having your emergency fund? What experiences and wisdom can you share with others?