According to a new study, most Americans are not financially prepared to handle a crisis. The report of more than 1,000 adults found that just 44 percent said they could handle a $1,000 emergency.
The participants said that they simply wouldn’t, or couldn’t, pay for an emergency expense of $1,000 or more. What would people do when faced with this type of crisis? About 35 percent said they’d borrow money, with 21 percent claiming they put the expense on a credit card. The biggest obstacle to paying for an emergency with cash is inflation. A majority of the study’s participants (63 percent) said high inflation rates have prevented them from keeping a well-padded emergency fund.
If you’re among those who can’t afford a $1,000 emergency, try not to rely on a credit card to save you. Debt is also not easy to handle. Instead, try these tips to build an emergency fund:
Make it a Priority. Make saving for your emergency fund a priority until it is stocked with at least six months’ worth of fixed expenses. Cutting back on fun expenses can be easier when you keep in mind that it can be temporary.
Set up an Account. Set up a specific savings account for the emergency fund. This way you’ll be less tempted to dip into the money. Be sure to check credit unions and online banks, as they often offer the highest interest rates.
Do One Thing: Make sure your emergency fund is in a high-yield savings account.