The lack of an emergency fund is too common in American households today. Did you know over 60% of Americans do not have enough savings to cover a $1000 emergency? If a car accident happened, many Americans would not be able to pay the car insurance deductible. If the refrigerator stopped running, many people would not be able to replace it without using credit. These worries cause stress and an emergency fund can help with money stress.
An emergency fund is money set aside in-case of an unexpected event. Emergencies come in all shapes and sizes such as job loss, unexpected pregnancy, accidents, and more. Emergency funds are safety nets so you don’t have to borrow money at a high interest rate from a bank or credit card.
A fully-funded emergency savings account amount will be 3 to 6 months of expenses. The money needs to be accessible quickly during a financial emergency. Do not invest your emergency fund. Keep your money in a savings account at an insured bank to guarantee availability when needed.
If you are still paying down debts (excluding your mortgage), I recommend a partially funded emergency fund. A partially funded emergency fund amount is $1000 per adult and $500 per child in the household. Example: family of 2 adults and 2 children will need $3000 for a partially funded emergency fund [(2 x $1000) + (2 x $500)].
Money is a top cause of stress for many people. The American Psychological Association (APA) conducted a survey in 2014 that relates stress and money. 72% of Americans are stressed about money. Of the 72%, 22% are EXTREMELY stressed about money.
When people are stressed about money, they are less likely to go to the doctor fearing medical bills. According to the APA, nearly 1 in 5 Americans have skipped or considered skipping a doctor visit because of financial concerns. Not to mention, 30% of adults site money as a big relationship problem.
Common effects of stress on the body include headaches, muscle tension, fatigue, stomach problems, and more. Stress can make you feel anxiety, overwhelmed, restless, and irritable. None of these are good for your health and well-being. It is time to build your emergency savings to eliminate your financial stress.
Are finances stressing you out? What are you doing to change that?
Proverbs 12:25 – Anxiety in a man’s heart weighs him down, but a good word makes him glad.