Savings Is Important Now More Than Ever. Find Out Why.
February 4, 2021
In 2020, many consumers found it necessary to use savings to help cover expenses, and it became clear why having a financial cushion is important. Clever Real Estate COVID-19 Financial Impact Survey conducted in September 2020 found that 28% of Americans used savings or an emergency fund to cover living expenses.
Now that we’ve been navigating through a pandemic for nearly a year, it’s time to get serious about saving — even if you think you’re in a solid financial position.
A 2020 Pew Research Center study found that:
- One-in-four adults had trouble paying their bills last year
- A third used savings or retirement accounts to make ends meet
- About one-in-six borrowed money from friends or family or visited a food bank
A financial cushion, or emergency fund, can allow you to cover bills if your income changes or something unexpected happens. This could include unemployment, a medical emergency, unplanned home repairs, urgent veterinarian care, or vehicle repairs.
Having trouble starting an emergency fund? Many consumers find themselves challenged to save. In fact, the Clever Real Estate survey also found 37% of Americans have no emergency savings at all.
How to start saving
Begin by calculating your living expenses, including mortgage or rent, utilities, groceries, and vehicle costs. Then, set a goal, such as reaching $1,000 in savings within a certain timeframe. You can build from there, eventually reaching at least three months’ worth of living expenses.
To achieve your $1,000 savings goal in six months, transfer $167 from your checking account to your savings account each month (or $42 each week). In one year, you can reach the $1,000 savings goal by transferring $84 a month (or $20 each week) to your emergency fund.
To make saving a regular habit, set up automatic transfers to occur every payday so that the money immediately goes into your savings before you have a chance to spend it. This will ensure you consistently save.
Where to save
When you start your emergency fund, look for a savings account that offers a higher interest rate, has no minimum balance requirements, and no fees. Remember, you don’t want to access these funds unless you need to, but they should be accessible without a fee. Every penny counts, especially when you’re first starting to save.
MSUFCU’s Savings Builder℠ account is designed to help you save for life's unexpected events faster. Unlike traditional savings accounts, Savings Builder pays you more on your initial savings, helping you build your savings faster so you'll have it when you need it most. For more information, visit msufcu.org/savingsbuilder.
Tags: Savings, Money Management, Tips and Tricks