Despite nations’ current infatuation with trying to build a debt based economy, the financial fundamental of growth through savings is still as tried and true today as it has ever been. However, fewer people now actually know the right amount they should save to prepare for a financial catastrophe. According to an Federal Reserve poll, regardless of income bracket, Americans grossly underestimate the amount they should save for a rainy day. Business Insider reports:
Overall, the numbers are pretty depressing since most experts recommend saving at least nine months to a year of income in an emergency account.
“People are often out of work now for as long as nine months, and if they don’t live on savings, they live on credit. So when they replace their job, they are behind because now they have debt to repay,” Gail Cunningham, spokeswoman for the National Foundation for Credit Counseling told Bankrate earlier this year.
To make sure that doesn’t happen to you, here are a few ways to beef up your piggy bank per YM contributor Trent Hamm:
1. Use automatic transfers. “Set up an automatic transfer between your checking and savings accounts, making sure that you’re not pushing your checking account balance down to zero,” said Hamm.
2. Forget about it. Once everything’s set up, “be vaguely mindful of it,” he said. “Don’t let your checking account get low enough so that the automatic transfer has any danger of causing you to overdraft.”
3. Do it slowly, but surely. A little goes a long way, said Hamm, noting that “if you’re putting in $20 a week, for example, you’ll have a little over $1,000 in your emergency fund at the end of the year.” That’s plenty money to handle the unexpected trip to the dentist or car repair.
