Nearly a quarter of savers who take the America Saves pledge chose “emergency savings” as their first wealth-building goal. And they have the right idea. Research shows that low-income families with at least $500 in an emergency fund were better off financially than moderate-income families with less than this amount. Yet most Americans don’t have enough savings to cover an unexpected emergency.
What is an emergency savings fund?
An emergency savings fund consists of at least $500, usually in a savings account that you do not have easy access to. Saving for this fund starts with small, regularly scheduled automatic contributions that build up over time.
Why should you start saving for emergencies?
Maintaining an emergency savings account may be the most important difference between those who manage to stay afloat and those who sink in debt. It also gives you peace of mind knowing that you can afford to pay unexpected expenses. That’s because keeping $500 to $1,000 of savings for emergencies can allow you to easily meet unexpected financial challenges such as repairing the brakes on your car or replacing a broken window in your house.
Not having emergency savings is one of the reasons many individuals borrow too much money, resort to high-cost loans, or increase their credit card balances to high levels.
How should you build your emergency savings?
The easiest and most effective way to save is automatically. This is how millions of Americans save. Your bank or credit union can help you set up automatic savings by transferring a fixed amount from your checking account to a savings account. Learn more about saving automatically.
Where should you keep your emergency savings?
It’s usually best to keep emergency savings in a bank or credit union savings account. These types of accounts offer easier access to your money than certificates of deposit, U.S. Savings Bonds, or mutual funds. Though these are useful tools for long-term saving, they are not ideal for an emergency fund that you may need access to more quickly. But not too quickly! Keeping your money in a savings account makes it much less likely that you will use these savings to pay for everyday, non-emergency expenses. Out of sight, out of mind. That’s why it is usually a mistake to keep your emergency fund in a checking account.
Your local America Saves campaign can help you find a participating financial institution that offers low- or no-minimum balance savings accounts.
How can you get started?
Those with a savings plan are twice as likely to save successfully. This includes setting a goal to build an emergency fund and deciding how much you want to save each month. This is where we come in. If you’re ready to make a commitment to yourself to save, take the America Saves pledge to save money, build wealth, and reduce debt. We’ll keep you motivated with information, advice, tips, and reminders to help you reach your goal to build an emergency fund.
How can you find money to save for emergencies?
There are many places to find money to save. Get started by checking out our resources on how to save money.
Adoption and awareness of direct deposit continues to build among consumers. A recent survey found that 82 percent of U.S. workers ─ crossing age, income and other demographic categories ─ are paid by Direct Deposit via ACH, up from 74 percent in 2011. >> Learn more
That's good news, because setting up automatic savings is the easiest and most effective way to save – it puts your extra cash out of sight and out of mind. There are a couple ways to automate savings with direct deposit:
- Use direct deposit at work to split your paycheck into different accounts: checking, emergency fund, retirement, investment, other goals. Automating retirement savings is a great way to assure that you receive any matches or employer contributions, too.
- Use direct deposit at tax time to put your refund directly into savings. A federal tax refund is the most money many American households receive all year. Make your refund an opportunity to improve your financial situation. >> Learn more about saving automatically
When you pledged to save and became part of the America Saves community, you set a goal and made a plan to save toward it. Now, make sure you’re using the best method to reach your goal – save automatically!
America Saves for Young Workers
America Saves created a program that is helping youth save in this very way. Over 25 partner programs are integrating America Saves for Young Workers (ASYW) into their summer jobs programming. Through ASYW, a partnership is created between the employer, one or more financial institutions, and America Saves. America Saves provides employees with the motivation to set up direct deposit and save a portion of their pay. And Youth Employment Programs provide direct deposit and the America Saves for Young Workers Program to employees. >> Learn more about America Saves for Young Workers
American Savers have recently taken at least one tangible step to start or accelerate their savings. Most have been successful. The behavior and outcome of these savers make them a distinctive subset of the American public, a group we're calling Committed Savers. Profiling these Committed Savers provides valuable insight into what motivates Americans to save money and the unique characteristics and actions of particularly successful savers.
New research by America Saves, in partnership with Artemis Strategy Group, explores who Committed Savers are, what triggered and or/accelerated their savings, what barriers they encountered in their savings journey, what steps they took to overcome these challenges, and how well they succeeded. >> Read more in our press release