Most Americans have $41,000 in savings – how are you? | Ali Akram

Miguel A. Padriñánvia Pexels

According to the latest study, the average American has a whopping $41,600 in savings accounts Consumer Finance Survey (SCF).

This impressive factoid paints a flattering picture of personal finances in the US before the pandemic. But in reality it overshadows a more accurate depiction of most Americans’ ability to save.

Another side of the data collected by the Federal Reserve shows that the median is much lower. The median, which is the middle number of all bank balances involved in the study, shows that the average doesn’t tell the whole story. The average savings balance of just $5,300.

Now, three years into the pandemic, the country’s savings is on a rocky road. Another survey of 1,000 US households found that more than half of all Americans are so poor with savings that they cannot cover an unexpected $1,000 expense.

What if you don’t have an emergency fund?

Without emergency savings, you are vulnerable to unexpected expenses that you cannot anticipate. Car problems, health problems, or household repairs are frustrating for anyone dealing with these problems, but they become real emergencies if you don’t have the money on hand to solve them.

When your emergency fund is empty, online loans may be the only way to deal with an unexpected car repair or medical expense. Financial institution MoneyKey describes online lending as a way to bridge the gap between your paycheck and an urgent problem.

When approved, online loans bring you the funds you need to run your business. But like all short-term personal loans, Online loans through MoneyKey come with installments and fees that you must repay on top of your loan amount.

That’s the cost of borrowing money online or in person, but that’s why online loans never trump savings. A solid emergency fund gives you the luxury of making repairs on your own, so you can avoid the interest and financing costs associated with the average online loan.

How much savings should you have in your fund?

While an emergency fund averaging $41,600 would make life easier, that may not be realistic. In general, you should aim to save up to three to six months of living expenses for emergencies. This amount is sufficient to support you with minor expenses or short-term absences from work.

However, some advisors recommend doubling this goal up to 12 months. At this size, an emergency fund gives you a safety net for longer-term problems. You’ll have a year of cash to lean on if you’re sick in the hospital or need to take time off work to care for a sick loved one.

Use a budget to track and reduce expenses

Whether you’re aiming for a three month goal or a 12 month goal, a budget is your best bet for home savings. Track your spending to see where your money is going each month. You may need to cut unnecessary waste to free up enough money to save.

With many restrictions on entertainment and travel being lifted, it’s important not to let these non-essential expenses run away with your budget. You have to sacrifice these things to save more.

Find more income

You can only cut so much expense until you are left with the most important things you can’t live without. If you’re living on such a tight budget that you still can’t save, it might be time to increase your income.

Traditionally, that would mean asking for a raise or doing what you need to do to qualify for higher-paying jobs. But there is also an option to monetize a hobby or skill to make more money with a virtual side job.

bottom line

According to that Budget 50/30/20you should aim to save up to 20% of your monthly income spread across all savings goals including retirement and emergency funds.

While this may be a challenge, savings are important. Having cash on hand to meet emergencies without borrowing online gives you more financial freedom

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