Everyone is familiar with the list of reasons why we should be putting money into a savings account – as a rainy-day fund in case something needs repair, or as a sort of financial buffer if you were to lose your job. Apart from those reasons, few people realize that having an emergency saving can be the difference between life or death in certain circumstances. To give yourself that safety net, leading retirement and savings plan provider Ubiquity offers a few tips to get your emergency savings plan underway.
How an Emergency Savings Plan Can Save Your Life
You may be in the same financial situation as many Americans – about 60% of which have revealed that they have only the capacity to spend a maximum of $400 in an emergency. Unfortunately, medical expenses are going to far exceed this, and given that 24% of Americans had to pay out of pocket for emergency medical expenses in a single year, you’ll need another method to be prepared for when such financial surprises come your way.
Additionally, such emergency funds are going to be necessary post-retirement, when you no longer have the option of working overtime or other such alternatives to earn a bit of extra cash in a short period. To avoid turning to credit cards, or simply having to settle for weaker, less accurate treatment for any medical issues, an emergency fund could turn your circumstances around. This is becoming clearer as the new coronavirus spreads around the world and people are left vulnerable to the illness due to lack of access and affordability of testing. Having the funds to pay for the several-thousand-dollar test and necessary treatment can mean the difference between life and death.
Harvard researchers discovered that more than 62% of all personal bankruptcies were due to overwhelming medical bills and illness. Without an emergency savings plan, you risk having to pay out of pocket for healthcare to the point of losing financial stability, thereby becoming vulnerable to a lack of access to healthcare in the future. Create a foundation for yourself before it’s too late.
How to Set Up an Emergency Savings Plan
Before you start your emergency fund, you need to set clear goals – you don’t want to become overwhelmed with your plan, as that will only work against you in the future. Have a clear picture of your income, bills, personal spending habits, dependents, and job stability for full context on how much you should be putting away, and how frequently. Ideally, you’ll be aiming for 3 to 6 months of coverage from your emergency fund.
- Choose the right account. One of the best options for emergency funds is an interest-earning account so your fund will passively increase as you save. Examples are money market accounts or high-interest savings accounts.
- Build your fund. Consult with a financial advisor or use an easily accessible planning tool to determine the frequency with which you should contribute to your emergency fund.
That’s it! It’s that easy to start your emergency fund. Getting started sooner than later will get you closer to financial stability sooner, even in the event of an emergency. Once you have your emergency fund, you can live with greater peace of mind that no matter what, you will have the ability to care for yourself and loved ones by covering any medical expenses that come your way.
