A new survey finds Americans are not setting aside enough money in emergency savings to cover a significant unexpected expense. More than half of American households were faced with emergency expenses in the past year.
Unexpected events can be anything from medical emergencies to home repair or losing a job.
SunTrust Private Wealth Management Senior Vice President Client Advisor Caroline Mitchell said last year around this time, most of us were faced with an unplanned financial emergency.
“I think we all in the Houston and Gulf Coast area experienced quite an emergency last year during Hurricane Harvey that really tested our financial resources and perhaps made many of us aware that we didn’t have the emergency savings we needed,” said Mitchell.
Reportedly, consumers report saving less than five percent of their monthly household income for emergencies.
So, if an emergency happens, we’re left to rely on family or high-interest credit cards.
In order to save more, people were willing to give up going out to eat, online subscriptions, gym memberships and even vacations.
However, a recent SunTrust survey found more people are saving for travel, than emergencies.
Mitchell said the industry standard is to have three to six months of household expenses saved. But, you might need even more depending on your personal situation (uneven income or high deductibles).
“Paying yourself first means taking the step of setting up a savings account and actually having that dollar amount taken directly from your paycheck and directed to that savings account…automatically,” said Mitchell.
To figure out your goal, look at household expenses for six months to a year and then compare that to your income, then see what's left over, leave a little cushion, and determine how much you can save every month.
Earlier this year, a Bankrate.com survey found people had savings sufficient to cover a $1,000 surprise expense.