Now that you’ve been schooled on what can happen when you don’t have emergency savings, here’s how to be better prepared next time.
6 Lessons COVID-19 Teaches Us About the Value of Emergency Savings
Like many people, you may be wishing you had a fat emergency fund during the coronavirus pandemic. After all, millions of people are losing their jobs, and you may be next – if you’re not already one of the unemployed.
It’s already difficult to put away enough money to live on for six months – or even two months – if you lose your job or get sick or injured. Then along comes COVID-19, shutting down businesses and entire cities on “essentials-only” lockdowns, and you barely have enough to pay the bills.
As tempting as it may be, don’t berate yourself for not having an emergency fund. Instead, learn your lesson and be ready when the next emergency occurs.
Click or swipe for 6 lessons to learn from the COVID-19 health and economic crisis and ways to begin building emergency savings.
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1. Jobs disappear
In March, millions of people watched their jobs go “poof” with little or no warning. When your income goes away, you need emergency savings more than ever. Ideally, you should have enough saved to keep paying rent or mortgage payments, monthly bills and other expenses for at least a few months.
Saving tip: Sign up with your employer to have a percentage taken directly from your paycheck and deposited directly into your emergency savings account.
2. Work hours get cut
Even if you don’t lose your job, an employer can reduce your work hours any time, not just in the midst of a health and economic crisis. Companies can also run into financial trouble and cut hours or freeze wages, 401K contribution matches and bonuses. We’re all getting a big dose of that truth right now, as businesses nationwide close temporarily or struggle to pay staff.
Saving tip: If you can, deposit your entire stimulus check from the government into an emergency fund savings account. Even if you can only spare $200, that’s still a good start toward building a basic emergency fund of $1,000. Then keep making regular deposits.
3. Living paycheck-to-paycheck is risky
You may have lived paycheck-to-paycheck for much of your life and still managed to pay the bills. Now the COVID-19 pandemic is showing all of us how risky that financial path can be.
Saving tip: Always have an amount that’s greater than what you earn weekly, biweekly or monthly in an emergency fund.
4. Cars still break down
If your car needs necessary repairs, you’ll need to fork over payment, whether you have a job or not. If you’re forced to pay with a credit card because you don’t have emergency savings, the midst of a troubled economy is no time to rack up more debt.
Emergency savings tip: Ask your mechanic what repairs or parts to anticipate in the near future and set some money aside from each paycheck so you can pay with cash.
5. Anything can happen
If someone told you a few months ago that NCAA basketball tournaments would be canceled, all sports would grind to a halt and New York, Seattle and other major cities would have empty streets night and day, you’d have thought they were crazy.
Now the COVID-19 crisis is the perfect reminder that “anything can happen.”
Saving tip: Every time you have a five-dollar bill, stash it in a coffee can or envelope. Then every week or two, take that cash and deposit it in your emergency savings account. You’ll be up to $1,000 sooner than you think.
6. You can’t help others if you can’t help yourself
Let’s say you still have a job but your best friend loses hers. Or your older parent needs money to help pay the bills. You can’t easily help people you care about when you have no savings to fall back on if you lose your own job, get sick or have to relocate for a new job.
Saving tip: Sell something you don’t use or need online. Sell a few items and you can open an emergency savings account. The more you have in savings, the more fun it is to add to it consistently and watch the balance grow.
Published by Debt.com, LLC