Life has a sneaky way of costing more than anticipated. You might pull out of your driveway, hit a nail, and find yourself charging a $150 replacement tire on your credit card. Or, you might wake up to no heat -- and a $500 repair to fix your HVAC system.
Situations like these are often unavoidable. So it's important to have plenty of money in savings for when they arise.
Alarmingly, though, data from TIAA finds that 1 in 8 Americans don't have enough cash reserves to cover a $2,000 emergency. And that's problematic, because ideally, you should have an emergency fund with enough cash to pay for at least three months of essential bills. That way, if you were to lose your job, you'd potentially be covered until you're gainfully employed again.
If you don't have the cash reserves to cover a $2,000 emergency, then chances are, you don't have a complete emergency fund (either that, or your essential monthly expenses are really low). If that's the case, it's important to boost your savings before the next crisis arises. Here are a couple of ways to go about that.
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1. Cut your spending and bank the difference automatically
If you have a fully loaded emergency fund and are doing well financially, then there's no reason to cut back on expenses that bring you joy, whether it's streaming services or takeout meals. But if you don't have a three-month emergency fund, and you're not close to having one, then it's time to do a serious assessment of your spending and find ways to cut corners immediately.
To be clear, you don't have to commit to a lifetime of reduced spending. But let's say you need $6,000 in savings for a three-month emergency fund and you only have $1,500 so far. It could pay to lead a really frugal lifestyle until your bank account is at least closer to the $6,000 mark.
Once you've identified expenses in your budget that you can cut back on, calculate what they amount to and set up an automatic transfer that allows you to bank the difference. For example, if you're freeing up $150 a month, arrange for that amount to leave your checking account after your monthly paycheck arrives and land in your savings automatically.
2. Boost your income with a side hustle
It's not easy to maintain a pared-down lifestyle, just as it's not so easy to work a side hustle into your schedule. But again, this isn't something you have to do permanently. It's something worth pushing yourself to do just until your savings are in a better place.
Think about your schedule and what sort of side gig you can manage. If you need flexibility, you may want to stick to a job you can set your own hours for, like delivering food or groceries. But if your goal is to secure guaranteed income, then you may want to sign up for shift work, such as working evenings or weekends at a local retailer where you know you'll make a certain hourly wage.
Remember, the nice thing about side hustle income is that it's extra. Since it's not earmarked for existing bills, you have the opportunity to save it all, minus what you might owe the IRS in taxes (something to definitely be mindful of if you're being paid on a freelance basis and wages aren't taken out of your earnings).
The fact that a large chunk of Americans can't cover a $2,000 expense is alarming but not so shocking. If you're in that camp, you owe it to yourself to try to change your financial picture so a major unplanned bill doesn't drive you into costly debt.
FAQs
56% of Americans can't afford a $1,000 emergency expense: We are 'living in a paycheck-to-paycheck nation,' money expert says. A majority of Americans say they can't afford a $1,000 emergency expense, a recent report from Bankrate finds.
What percent of Americans can't cover an emergency expense? ›
44% of Americans can't pay an unexpected $1,000 expense from savings. 'We're just not wired to save,' expert says. Many Americans cannot cover a $1,000 emergency expense with cash, a new survey finds.
Is $2000 a good emergency fund? ›
So don't beat yourself up if your emergency fund looks as anemic as your income feels. If you can manage at least $1,000 to $2,000 in a savings account, count that as an early win—especially if the extra cash helps keep you out of debt.
What percentage of Americans have $2000 in savings? ›
Majority of Americans Have Less Than $1K in Their Savings Now
| How Much Do Americans Have in Their Savings Accounts? | | |
|---|
| $101-$500 | 12.80% | 10.04% |
| $501-$1,000 | 11.30% | 12.58% |
| $1,001-$2,000 | 10.60% | 9.81% |
| $2,001-$5,000 | 10.60% | 10.64% |
4 more rowsMar 27, 2023
18% said their saving were at least $1000 but under $10,000, while 11% each had $10,000 to $49,999 and $50,000 or more saved up.
What percentage of people have $1,000 dollars in the bank? ›
Key Takeaways. More than one in four Americans (28%) have savings below $1,000. This is the case for 32% of Gen Zers, followed by Millennials at 31%, Gen X at 27% and Baby Boomers at 20%.
Can Americans afford a 500 dollar emergency? ›
A majority of American workers can't afford a $500 emergency expense. 76% of employees don't have enough savings to cover one month of their expenses. Over one-third of employees earning $100,000 or more live paycheck to paycheck.
How many people have 100k in savings? ›
How many Americans have $100,000 in savings? About 26% of U.S. households had more than $100,000 in savings in retirement accounts as of 2022, according to USAFacts, a nonprofit organization that analyzes data from the Federal Reserve and other government agencies.
What percent of Americans live paycheck to paycheck? ›
Recent MarketWatch Guides survey results indicate that 66.2% of Americans feel like they're living paycheck to paycheck. Respondents struggling to make ends meet span demographics, including genders, generations and incomes.
How can I get a $1000 emergency fund? ›
Every pay period, ask your employer to deduct $100 from your paycheck and transfer it to a savings account. Ask your HR representative for more details and to set this up. 2. Ask your bank or credit union to transfer $100 from your checking account to a savings account every month.
The 50-30-20 budget rule states that you should spend up to 50% of your after-tax income on needs and obligations that you must have or must do. The remaining half should dedicate 20% to savings, leaving 30% to be spent on things you want but don't necessarily need.
What is the right amount of cash to keep at home? ›
In addition to keeping funds in a bank account, you should also keep between $100 and $300 cash in your wallet and about $1,000 in a safe at home for unexpected expenses. Everything starts with your budget. If you don't budget correctly, you don't know how much you need to keep in your bank account.
What percent of people who make $100,000 live paycheck to paycheck? ›
Thirty-three percent of workers earning between $50,000 and $79,999 annually say they're living paycheck to paycheck, compared to 36 percent of workers earning between $80,000 and $99,999 and 24 percent of workers earning $100,000 or more.
What is living paycheck to paycheck? ›
Living paycheck to paycheck is generally defined as an immediate lack of ability to pay for living expenses in the case of loss of income.
How much money does the average person have in their bank account? ›
Key Statistics on Average Savings Account Balances
According to the Federal Reserve's 2022 Survey of Consumer Finances (SCF), Americans' average (mean) household savings account balance is $62,410. However, the median savings account balance of $8,000 might be a more accurate representation.
What percent of Americans struggle with money? ›
Key Findings
48.6% of Americans consider themselves to be “broke,” and 66.2% feel they are “living paycheck to paycheck.”
Do 60% of Americans have less than $1000 in savings? ›
According to a recent survey by GOBankingRates, nearly half of Americans have less than $500 in savings — and almost 60% of Americans have less than $1,000 saved up.
How many people have $100 thousand dollars in the bank? ›
Almost one in ten men have $100,000 or more in savings, but the figure falls by four percentage points for women (9% men vs. 5% women).
What percentage of Americans make more than $100 K? ›
One estimate found that the median U.S. household income is $77,397. Only 18% of individual Americans make more than $100,000 a year, according to 2023 data from careers website Zippia. About 34% of U.S. households earn more than $100,000 a year, according to Zippia.
