Don’t Freak Out About an Emergency Fund — Just Start One
BY AMRITA JAYAKUMAR
Let’s be real: For millennials, having an emergency fund is way down on the financial worry list, behind student loan debt, medical bills or saving for a down payment. Some weeks, it can feel like you barely have enough money to get by, let alone put some away for a rainy day. But that cash stash can be crucial in preventing a debt spiral or keeping you afloat if you lose your job. Regardless of income, building your emergency fund doesn’t have to be intimidating.
START SMALL, BUILD A HABIT
First, pick an amount you can put away on a regular basis, no matter how small. Then, commit to it. “It can be as little as $10 a week into a separate savings account,” says Lara Lamb, a certified financial planner at Abacus Wealth Partners in Los Angeles. Making a small contribution every week is less painful than shooting for an ideal final sum, she says. Automatically transferring the money to a separate account helps you succeed at saving. The saving habit — even if it’s small — is valuable for your finances in the long term, says Eric Gabor, a certified financial planner at Eagle Grove Advisors in Jersey City, New Jersey. A family with at least $250 in savings is less likely to face financial turmoil such as a missed utility payment or eviction, according to a 2016 study by the Urban Institute, a Washington, D.C.-based think tank. Any amount above that — $400, $500 — improves your chances of navigating a setback. Getting started is especially important for younger adults. An Urban Institute study released this year found 35.6 percent of adults ages 18-34 surveyed in December 2017 had experienced “financial insecurity” in the previous 12 months. That was the highest among the study’s three age groups of adults under 65. It defined financial insecurity as the “inability to come up with a small amount of money to buffer negative economic shocks or to pay his or her credit card or nonmortgage loan.”
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