How would you pay for:
- Unexpected car repairs?
- A new furnace?
If your answer is with your savings, good job! Even though the economy continues to grow and unemployment is low, only 43% of people feel they could “find” $2,000 for an unexpected expense.
While this is better than in 2012 when only 35% of Americans felt they could find $2,000, it is still low.
This information was developed through FINRA’s Education Foundation.
We recommend an emergency fund be three – nine months of expenses – depending upon the stability of your job, whether or not you are self-employed, etc. To begin savings for an emergency fund, you could:
- Save a percent or flat dollar amount from each paycheck.
- Save your raise until you have enough; then keep putting the money away for long-term investing (e.g. Roth IRA)
- Save your tax refund
- Reduce some “fun” expenses and put the savings in an account
Your emergency fund should be liquid – available at a moment’s notice without penalty for withdrawal . Usually this takes the form of a money market or interest-bearing savings account. At the time of this writing, for instance, Vanguard Prime Money Market is yielding over 2%.