How to build up your emergency fund
Bankrate: 33% of Americans have more credit card debt than emergency savings
(InvestigateTV) — A Bankrate survey found one in four Americans would rely on a credit card to pay for unexpected expenses.
The survey also revealed that just 41 percent of Americans said they could pay for a $1,000 emergency from their savings.
Mark Hamrick with Bankrate said this is down from last year and interrupts three years of progress. He thinks inflation is likely the biggest reason why.
“Americans have had to focus on paying for some of the things that they need instead of what they want,” he explained. “Many are still spending on the things they want as well, perhaps to some degree to the peril of their financial situation.”
Hamrick said we all need to prioritize building an emergency fund so we can avoid putting things on credit cards. He suggested writing down all the money coming in and going out each month to find funds that can be set aside.
“The mechanism by which to do this is to have a separate emergency savings fund,” he advised. “Ideally, in a high yield savings that’s paying on an annual basis four percent or better. It has to be highly liquid.”
He recommended linking the to a traditional checking and setting up automatic transfers to make saving effortless.
By setting a goal and making automatic monthly deposits, you can quickly build up $1,000 in savings.
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