There's An Emergency With Savings: Americans Can't Afford To Do It

As you scroll on social media, you’ve probably seen the posts (like mine) that tell you about how you need to save for any emergency. We’ve seen the headlines of layoffs becoming a norm to how inflation continues to be hot among the cool assumptions. But one of the things that creators, economists, planners/advisors, or just money folks need to understand about saving is; that many aren’t doing it because they can’t afford to.?

My Roman empire around personal finance, and financial planning is that some people need to learn money management, while some need to have more money to manage. It’s true and has been seen throughout not only the pandemic and post but also since 2008. It’s hard for some folks to see the need to save for a $1,000 emergency when there is an emergency in their budgets. While things are alarming now, the smoke has been building for a while. Just like folks see the headlines about being an IRA millionaire when a lot of Americans can’t save consistently for retirement. Two things can be true at the same time, but more focus needs to be on those who need to understand how to save some and make up the more later as they grow with their money.?

I remember adding content to Bankrate years ago when I worked at B of A around our Small Business Checking and Credit products and scrolling to see other content that was on the site, one of my favorites. But I kept ta pin in one of their latest reports until now and we’re going to talk through it. The report is centered around, you guessed it - savings or lack thereof. The “Bankrate’s 2024 annual emergency savings report” highlighted what we already know, Americans need to save but can’t see the way to do so.

How bad is it? More than 1 in 3 Americans have more credit card debt than emergency savings. You know the same credit card debt that is over $1T collectively. Yeah. that’s right.?

But lately over on X/Threads, I’ve been focused on driving a different, but not new, narrative around saving - doing some is better than none because it still increases your “sum”. While the origin of it is full of puns, it does sum up how folks should look at saving for now and later.

While the stats are alarming, knowing that little efforts compound big is as impactful as anything else. We often talk about compound interest in regards to Warren, but don’t connect it to how the small efforts build muscle. I mean, I did reference planning your paycheck like the pre-workout to working your budget and paycheck to balance as much as possible. The good news is, that anyone, yes you, can build an emergency fund, even with the income you have.?

Audit Your Wallet:

If you have seen my YT videos about savings or understanding your budget, this has been my ism (a thing I constantly say). It has you focus on where you are right now with your budget - from bills to savings to behavioral and beyond. The reason why it’s made the cut on this post is that for you to know how much or little you can save, you need to get real with yourself and your accounts.?

Sure we know that 56% wouldn't be able to cover a $1,000 emergency expense; but how much of what they are bringing in or spending could they float to savings? If only $35 or $50 per check, know and look for ways to grow it. I’ve said in articles before that you should have a savings rate of 10% of your income, but if you don’t know how much you can save, your rate is still at 0%. Know the needle to move it.?Understanding your cash flow will allow you to flow what you can to fund what you need to!

Taking Control: Building Your Savings

No matter the type of fund - emergency, sinking, or ____ type of fund, these next steps will help you correct your savings rate.?

• Start Small, But Start Now: It doesn't have to be a huge chunk of money. Even $50 per paycheck can grow significantly over time.
• Find Your Savings Haven: Look into a high-yield savings account (HYSA) to maximize your return on savings. You know that’s my jam, talked about them here.?
• Automation Is Your Link: Set up automatic transfers to ensure consistent saving – "set it and forget it!"
• Research Your Budget: Track your expenses. Identify areas where you can cut back – those unused gym memberships or expensive subscriptions can add up!? I talked about negotiating your bills here .
• Track Your Spending: Tapping in with your spending every two weeks will help you stay focused. How you can stay on budget if you only check it on the 1st or the 1st week of the month??
• Explore Cheaper Alternatives: Look for more affordable ways to do things. Can you brown-bag lunch instead of eating out or lowering your gym bills to move the savings?
• Challenge Accepted! Consider a "no-spend" or "low-spend" challenge for a period (2 weeks to a month) to identify unnecessary spending habits. Learn about those here.

Celebrating Milestones and the Power of Compound Interest:

Every dollar saved is a victory! Acknowledge and celebrate your milestones, no matter how small they may seem. Remember, consistency is key. As you keep saving, the magic of compound interest will come into play. Compound interest allows your money to grow exponentially over time, making your savings efforts even more rewarding. We'll get deeper into the power of compound interest in a future post! These small consistent amounts of $25 will accumulate significantly over time - in the right type of accounts (you know, HYSAs and CDs).

Calculate Your Personal CPI:

Yes, we’re chatting about this again. Why? 66% would worry about covering one month's living expenses if they lost their primary income. Understanding your CPI will help you budget not only a savings but also understand that your essentials are for a skeleton budget.?

• As you've previously read , calculate your personal Consumer Price Index (CPI) by tracking your spending categories.?
• Compare your personal inflation rate with national averages to understand your unique spending patterns.
• Adjust your budget to account for your personal CPI, ensuring that you allocate enough for savings and essential expenses.

Building an emergency fund or saving in general takes time and discipline, but starting with small, consistent steps can lead to significant progress over time. Also, can we stop talking about what Gen Z, Millennials, or Boomers are doing financially - collectively we need to manage money better and for some pockets, make more money.? By understanding your budget, automating savings, and challenging yourself to cut unnecessary expenses, you can create a solid financial foundation. Prioritize your financial health now to ensure a more secure later. Remember, the journey to financial wellness starts with the first dollar saved. You can do this!?

If you need someone to help you with budgeting, education, or financial planning - check out my offerings . Don’t forget to follow me on all forms of social media outside of this post.?

Question: What’s your mindset and mannerism around saving and how can I help pivot that into practice for you?