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A New Report Contains a Shocking Bit of Good News About Our Savings Habits
Feeling bad about the health of your emergency fund? Let this recent report inspire you to do more — or just allow you to pat yourself on the back, because it’s all going to be OK.
Bankrate’s latest Financial Security Index shows we’re getting better and better at preparing for unexpected expenses.
Thirty-one percent of respondents reported having six months or more of expenses tucked into an emergency fund, and 17% said they have three to five months of expenses stashed away.
This time last year, the survey showed that 28% had six or more months of costs in savings.
Millennials, You’re Doing OK. Really.
While 31% of adults having an adequate emergency fund may seem low, that rate is reason for optimism. “That’s the highest Bankrate has seen in the seven years we’ve been asking about that,” Bankrate’s Amanda Dixon explained in the report.
Meanwhile, 28% of last year’s respondents reported having no emergency savings, while this year, only 24% of those surveyed admitted the same.
Last year’s report broke out education and earning levels, which only really proved that no one is as good at saving for emergencies as they’d like to be.
This year, because we haven’t done enough intergenerational bickering, Bankrate compared millennials’ saving prowess to that of baby boomers’.
The generations are neck and neck when it comes to not having any emergency funds, so, nothing to be proud of there.
But when you look at respondents who do have some emergency funds saved, you realize how well millennials are doing. Twenty-seven percent of millennials have three to five months of emergency funds, while 23% have six or more months’ worth saved up. As for baby boomers, 38% have six months or more of emergency funds, which should surprise no one considering they’ve had more time to save.
Overall, the Financial Security Index is up 3 points from this time last year, to 106.7. The index takes job security, net worth, comfort levels with savings and debt, and respondents’ overall financial situations into consideration. Any score higher than 100 indicates “strengthening financial security.”
How to Boost Your Emergency Fund Right Now
Do articles like this one make you nervous? Yeah, me too. And I’m the one writing them.
If your emergency fund is looking less than healthy, remember, it’s always a good time to save. No amount is too small.
If you need to, you can trick yourself into saving by setting up automatic transfers from your checking account to a savings account designated for emergency expenses.
It can also be helpful to talk about your emergency saving efforts with a willing (or reluctant) accountability partner. This might be your significant other, a best friend or even a co-worker confidant who has similar financial goals.
The more you talk about your savings goals, the more excited you’ll be about making progress. Your accountability partner will be excited for you, too.
Once you’ve saved up several months’ worth of expenses, don’t touch it. Admire your balance, and revel in your continued saving efforts.
But don’t take money out of your account unless an “emergency” expense is unexpected, urgent and necessary. Not one out of three. Not two out of three. All of the above.
Lisa Rowan is a writer and producer at The Penny Hoarder.