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Build Your Emergency Savings Cushion

Founded in 1951, the National Foundation for Credit Counseling is the largest serving nonprofit financial counseling organization. Find various topics in this blog, including personal finance, credit counseling, housing, budgeting and student loan help. Click here to speak with an NFCC-certified Consumer Credit Counselor.

By Mark Foster

Although the Great Recession is over the economy still seems to be merely limping along. Thirty-nine percent of adults do not have any non-retirement savings, according to a survey by the NFCC.

Saving is an essential goal to have. Emergencies are a fact of life. It’s not a question of “if” you will ever have an emergency, but “when.” So having money saved is a necessity.

Fifty-nine percent of adults age 44 or younger do not have even $500 saved, according to the Social Security Administration. And in a recent CCOA Web poll, when asked how much non-retirement money someone had saved up, 56 percent chose the answer, “A savings account? What’s that?!” CCOA recommends automatic deposit as an easy and effective way to save on a regular basis.

It’s been widely recommended that adults save three to six months of their annual net pay. While this is a good long-term goal to have, it can be very discouraging to those who have little or no money saved. A good short-term goal may be, for example, to save $500. Set short-term, mid-term, and long-term goals and write it down and post it where it will be a regular reminder to work toward your goals.

The most successful savers will have a budget to keep them focused and goals to motivate them to stay on-budget. Tracking expenses for a month to see where your money is actually going is an important first step to creating a realistic budget. Oftentimes someone will find a blind spot in their spending, such as spending too much on entertainment or dining out, and tracking expenses will discover this and allow the person to make necessary adjustments to a budget. With expenses tracked and a budget in place, it will be much easier to build an emergency savings cushion.

Mark Foster is Director of Education with Credit Counseling of Arkansas (CCOA). CCOA is a member of the National Foundation for Credit Counseling. Visit CCOA online at www.CCOAcares.com.

Views expressed are the personal views of the author, and do not represent the views of the National Foundation for Credit Counseling, its employees, its members, or its clients.

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