No Emergency Fund? Aim to Save $ 250
If you’re like most Americans, you may not have saved or invested a ton of money. And reading what you should or should be saving – say, saving 20 percent on each salary, or keeping your annual salary by age 30 – can be overwhelming. So much so that you just might not get started.
But as Amrita Jayakumar writes for NerdWallet , a little money hidden can help your family avoid a big financial setback. Jayakumar cites this 2016 study by the Urban Institute, an economic and social policy think tank, which found that:
Families who have even a small amount of non-retirement savings are less likely to be evicted, miss out on housing or utility bills, or receive government benefits in the event of a disruption in income. The savings cushion works with very low savings (US $ 250–749); in the case of government benefits, any savings reduce benefits. However, higher savings rates are associated with even lower poverty rates and benefits. This relationship is maintained taking into account the family’s income.
I’ve written before about the importance of starting small . As with any habit, it takes time to improve your financial health. Focusing on a smaller goal – say, $ 250 to $ 750 in your emergency fund (or, as I wrote earlier, enough to cover your health insurance deductible ) – can inspire you to do more. Breaking your big goal down into smaller steps is like a snowballing method of paying off debt: you get excited when you complete one of the “smaller” steps or goals, so you keep going.
Once you’ve hit that $ 250, you can continue. According to Jayakumar, the next step will be to save monthly expenses on housing, transportation, food and insurance.
And once you start doing that, you’ll build financial muscle to save on other expenses or pursue other goals. “Regardless of income, creating your emergency fund shouldn’t be intimidating,” writes Jayakumar. Start small.