When it comes to handling family budgets as well as personal savings, couples need to set aside extra funds in case of any emergencies. In fact, experts call it ‘a necessity’ even though there’s an increase in the amount of people who feels that this isn’t necessary.
To back this up, research featured by CNBC revealed that 29% of Americans have no emergency savings, which is higher than the previous years with 26%.
“There are always these things that pop up, that don’t normally happen but affect your finances,” said certified financial planner Clark Randall. “If you’re always handling those with credit, then you’re never really achieving what you want to do.”
Although, saving for a rainy day isn’t easy, especially if a family has plenty of other expenses to manage. In this post, we will provide tips on how to help you start saving for emergencies to help safeguard your family.
How much should you save?
This really depends on the size of your family. Most families will be advised to save salaries equating to three to six months to cover the expenses needed if one member has to be off work for that amount of time. However, couples that don’t have children, won’t necessarily need to save that much. Families with children obviously have more expenses and general obligations so the bigger the emergency fund, the better.
“That three-to-six-months rule is just a guide,” said Janet Stanzak, a certified financial planner. Although, some financial advisors suggest you could even save up to two year’s worth of salaries depending on your family’s situation.
To prepare for the possibility of losing your job, experts state that you should prepare an emergency account that should cover your expenses for nine months to a year.
“People are often out of work now for as long as nine months, and if they don’t have savings, they live on credit. So when they replace their job, they are behind because now they have debt to repay,” says Gail Cunningham, spokeswoman for the National Foundation for Credit Counseling in Washington, D.C.
How to save the money
There are plenty of ways to start emergency savings, but investments are the best way to grow your wealth and build your funds accordingly. Investing in stocks is one of the most popular options among new investors in financial markets. By investing in a particular company’s stock, you are own a portion of the business that grows in value along with the market value of the firm.
It has become so popular that “55% of American adults own stocks,” according to FXCM’s post on how to buy stock. The article also cites that almost 90% of investors from the US earn over $75,000 yearly just by owning corporate stocks.
There are other investment opportunities that will help you grow your wealth over time. The tip is to make your investment portfolio as diverse as possible and to work on long-term goals to further increase the opportunity of growing your investments.
What to avoid
To focus more on emergency funds, you need to avoid incurring additional expenses such as loans and credit cards. You will have a hard time focusing your attention and money on your emergency funds if a big chunk of your salary goes to paying unnecessary expenses. If you have an ongoing mortgage, pay it off slowly and never miss a payment. Clearing your list of expenses doesn’t have to be drastic, but it should be planned out accordingly, so you can focus on building your family’s wealth over the long-term.