“If you are human, have a pet, kids, a house or a place to live, something is going to happen that will cost you money,” said Cornfield.
Traditional wisdom says one needs about 6 months of income squirreled away in an emergency fund to be in good financial shape. For many, that number seems astronomical and folks don’t even start because it seems like a battle they can’t win. Though more money is usually better, I’m gonna buck conventional wisdom and say that if six months’ income seems too steep a hill to climb, perhaps your goal should be $500.
It’s not as crazy as it sounds. Every year the Federal Reserve puts out a research study about the financial state of American households. This year, the board found out that the average American wouldn’t have $500 for an emergency. Of course, there are larger emergencies out there but for many people an unexpected expense might be a blown tire, automotive engine work, a broken appliance, or some other emergency expense that might cost around … you guessed it … $500.
From The Atlantic:
” …. what was happening to me was also happening to millions of other Americans, and not just the poorest among us, who, by definition, struggle to make ends meet. It was, according to that Fed survey and other surveys, happening to middle-class professionals and even to those in the upper class. It was happening to the soon-to-retire as well as the soon-to-begin. It was happening to college grads as well as high-school dropouts. It was happening all across the country, including places where you might least expect to see such problems. I knew that I wouldn’t have $400 in an emergency. What I hadn’t known, couldn’t have conceived, was that so many other Americans wouldn’t have the money available to them, either.”
Obviously, having $500 won’t solve all of your problems but “I’d rather be caught with it”. * in my Xzibit voice*
If you haven’t started an emergency fund, head over to your credit union and open a savings account asap.