Promoting Emergency Savings
It is no secret that a substantial emergency fund is a critical component in a family’s financial health. If you don’t have enough money to pay for a car repair, medical bill, or broken phone, then you are going to go into debt to pay for those expenses.
There are a few new initiatives to help households increase their savings accounts. Two of those initiatives are the Consumer Finance Protection Bureau’s (CFPB) Start Small, Save Up Initiative, and BlackRock's Emergency Savings Initiative. Both of these programs aim to use different tactics to boost emergency savings funds.
Emergency Savings - American Households are Struggling
Many households spend more than they earn and struggle to pay their monthly bills. Others don't save enough for retirement. Many don't even keep an emergency savings accounts.
Here are a few facts:
The Federal Reserve in a 2017 report estimate that 1 out of 5 adults cannot pay their monthly bills in full and that,
“Four in 10 adults, if faced with an unexpected expense of $400, would either not be able to cover it or would cover it by selling something or borrowing money”.
A national survey conducted in 2017 by careerbuilder.com,
“More than 1 in 4 workers do not set aside any savings each month” and “Nearly 3 in 4 workers say they are in debt today - more than half think they will always be” and More than three-quarters of workers (78 percent) are living paycheck-to-paycheck to make ends meet
A Fintech company that promotes financial wellness, FinFit reported in a press release from February 2019, based on a data assessment of 20,000 members:
71% do not have enough money on hand to cover 6 month’s living expenses 46% do not pay their bills on time 48% spend as much as they make or more each month 12% do not contribute monthly to a savings account, or any type of retirement account 11% have credit card debt in excess of $5,000 12% have student loan debt in excess of $20,000t
Freedom Debt Relief, a debt settlement company, recently ran a survey about savings and debt. They found that:
"... only 53% of them have an emergency fund. And even then, they aren’t saving enough to cover 6 months of expenses. In fact, 58% of them have less than $5,000 saved.
Emergency Fund Saving Calculator
Use BIlls.com's simple Emergency Fund Calculator to find out how much you need to save in an emergency fund. Calculate the amount you need, based on your income and budget, and the number of months that you want to cover. Once you have your target, compare that to your current available emergency fund savings.
Keeping a budget helps you understand how you are spending your money. A deeper analysis allows you to discover which are your basic expenses. Do you keep a budget?
Calculate your essential monthly expenses. Think about a case where you don't have income for a short-term and you need to cover you essential monthly expenses. You can cut out luxury items, but there are may bills that can't be avoided.
There is no one size fits all answer. However, most experts recommend at least three months of living expenses in an emergency fund savings account. Our recommendation, is that you set a goal to have at least six months of liquid assets that are in a safe andn easliy accesible account.
Now check your actual savings against the amount you need in an emergency savings fund. The calculator willl assess your situation and give you a quick recommendation.
The CFPB Smart Small and Save Up Initiative
One of the CFPB’s aims is to promote financial wellness. The CFPB created a worksheet and is encouraging savings through their Start Small and Save Up Initiative. Focusing on the $400 amount, they propose that you start saving small amounts of money to meet that goal. Naturally, they don’t say that you should stop there, but,
The target amount for emergencies varies from person to person depending on your situation. $400 is a good place to start.
Here are a few steps that they recommend:
- Set up your own savings rules. If the standard advice of “save 10% of your income” is too much, then set your own rules.
- Make them practical and achievable. Set goals in terms of amounts and places that you will save.
- Make a written commitment.
The CFPB also offers some practical ways to save including, save automatically through direct deposits, save as a family, save your tax refund and create savings habits.
Blackrock’s Emergency Savings Initiative
BlackRock is today the world's largest asset manager with $5.98 trillion in assets under management as of December 2018. They offer many different types of investment alternatives including mutual funds, ETFs, Closed-End Funds, and College 529 Savings plans.
Recognizing the fact that many American households are struggling and not saving enough money, they partnered with some innovative non-profit organizations. In February 2019,
BlackRock announced a $50 million commitment to help people living on low- to moderate-incomes gain access to and increase usage of proven savings strategies and tools – ultimately helping them establish an important safety net.
Blackrock is supporting leading industry experts, such as the Center for Financial Services Innovation (CFSI) to work together with financial institutions and bring tools and products that can help financially vulnerable households to save more money.
In the first phase of the initiative, BlackRock aims to begin offering and testing,
"high-quality, proven savings innovations such as prize-linked savings, rounding up transactions or rounding down deposits, and percent-based automatic savings transfers aligned with income.
Top Savings & Money Market Accounts (MMA)
Do you have a savings account? Is it earning as much interest as it could? Check savings accounts offers from different providers, to find the one that fits your needs and earns you the most interest.
Take Your Own Emergency Savings Initiative
Fortunately, you don't need to rely on the Blackrock program, nor do you need to use the CFPB worksheets. Here are a few initiatives you can take to increase your savings:
- Fine-tune your budget. Check out Bills.com budget guide, and read about five top budgeting apps. Your first step to savings is controlling your savings and making sure that you have money to save.
- Learn more about emergency funds saving accounts and how to create one.
- Check your monthly savings ratio. Are you saving enough? Emergency savings is vital, but don't neglect your retirement accounts, and if your emergency fund is topped off, then build up investment accounts.
- Learn about five savings apps that can help you automate your savings and build your emergency fund.
Check Your Financial Health
Building savings and especially an emergency fund is a vital step to improving your financial health. However, don't neglect the other financial health categories: spending, borrowing, and planning. Take the Bills.com Financial Health Survey and immediately get access to tips and tools to help you improve your finances.