Financial Wellness and Emergency Savings

Posted on Mar 1, 2021

Money is a leading cause of stress for most Americans, even those considered wealthy. Surveys show that people worry about retirement savings, unexpected medical costs, college tuition expenses, and credit card debt, among other financial concerns. Even before the economic impact of the coronavirus pandemic, many people were living paycheck to paycheck. Some surveys show that a significant percentage of Americans would find it difficult to cover an unexpected expense of $500 from money they’ve saved.

Achieving financial wellness means different things to different people. But besides contributing to a retirement plan and paying down credit card debt, creating an emergency savings account is an important part of financial planning. Consider your emergency fund as a cushion to help you absorb big-time and unpredictable expenses. A job loss, a major car repair, replacement of a furnace or large appliance, or costs resulting from a medical crisis or natural disaster are emergencies that can impact your ability to pay your regular monthly bills.

Some experts recommend saving three months of income in an account that is accessible, such as a basic savings or money market account. Set up an automatic transfer on a regularly scheduled basis. It’s easier to save money when it’s automatically deducted from your paycheck or other account.

If budgeting for emergency savings is a challenge, try apps that let you track expenses and create a monthly budget. There are a wealth of free resources online, such as financial newsletters and podcasts. You might also consider taking a class on a financial topic that interests you or talk to a financial professional.

Regardless of what your income level is, financial wellness is having a sense of financial security and the freedom to make spending choices. It’s also a feeling of control over your day-to-day expenses, the ability to handle setbacks without being derailed, and confidence that you’re on track with certain financial goals.

This material is provided for informational purposes only, and is not intended as authoritative guidance, legal advice, or assurance of compliance with state and federal regulations.