Between the high cost of living, low wages, and widespread debt, it’s no wonder that many Americans have virtually nothing saved. In fact, a recent Bankrate survey found that 28% of U.S. adults have no emergency savings whatsoever. And just 18% of Americans say they have enough saved to live off of for six months.
That’s startling news for anyone who’s planning on buying a house or who is at risk of falling behind in their bills. Although used cars make up three out of four automotive sales in the U.S., it’s clearly hard enough for many of us to manage car payments, insurance, and other fees. Paying for health insurance premiums and out-of-pocket costs on top of that is often difficult enough that individuals may forgo getting the care they need. But when an emergency strikes, there may be no other option than to seek treatment — and that can spell financial disaster.
Despite the fact that the North American sports industry will be worth upwards of $74 million by 2020, this sector comes with a significant share of medical problems. In fact, youth sports alone are responsible for nearly 3 million ER visits every year. That can translate into massive costs for families. Of course, when adults are hurt in accidents or on the job, the financial burden can be even bigger. Although the process of document exchange after a lawsuit is settled might take only 30 to 45 days, fighting a personal injury case in court (coupled with lost wages and medical bills) can put an undue strain on just about anyone. It’s no wonder that medical debt is the number one cause of personal bankruptcy filings across the country.
Ultimately, no matter how someone is injured, the associated costs can make it difficult for them to prioritize their health. That’s especially true if there’s no medical emergency fund in place. According to the Health Care Cost Institute, the average out-of-pocket cost for emergency care in 2016 was $1,322 — which means you need at least at much saved to obtain peace of mind. However, emergency transport and out-of-network care can increase those costs; it’s likely that the minimum savings still won’t cover what you need. Most experts recommend that your emergency fund should cover at least three months’ worth of living expenses. That number can seem like an impossible one to reach, particularly if you’re living paycheck-to-paycheck. But there are some simple ways to get started.
The first step is to cut back on unnecessary expenses. That might require you to give up your morning coffee and bagel, make more dinners at home, cut back on your gym membership, or cancel certain subscription services. It might also mean setting a budget for entertainment, grocery shopping, and clothing expenditures. You might embrace the gig economy and find a side hustle for yourself to make a bit of extra money, too. Conserving energy around the house can help you cut down on other monthly bills, too. In addition, paying more towards any debts you owe now will allow you to save more for emergencies later. Any extra money you receive (like a tax return, an anniversary check, or the sale of an item online) should go right into this emergency fund until you have enough to feel comfortable.
It’s a good idea to open a separate bank account for this emergency fund so that you aren’t tempted to spend it on other necessities or predictable expenses (which should be part of your regular budget). A savings account is a good bet, as it’ll generate more interest and will be easily accessible if you or a family member becomes ill or injured. Stay away from investing this money in the stock market and make sure to make contributions on a regular basis. You can even automate this task so you don’t have to think about it.
Although it’s not easy to admit you’re in perilous financial straits, it’s far better to recognize your situation before an emergency happens. That way, you’ll have time to build up your savings and feel more prepared should the worst ever occur.