Emergency Funds, Baby Boomers and Millennials
Since the 2008 economic crash, Americans are saving more than they have in the last 7 years. Even so, nearly a quarter of the population has no emergency savings, according to a recent survey.
Americans feel more job security and reported higher net worth than a month ago, according to the survey. Women reported the highest feelings of financial security in two years. This could be due to an increased comfort with debt, meaning these women may have paid down debt, refinanced debt, or recently received a promotion.
Emergency funds are a very important component to a healthy financial life, and having that safety net sitting in an account somewhere will give you peace of mind, knowing that should something unexpected happen requiring the use of savings to get you through a number of months, you have it at your fingertips.
To avoid unforeseen emergencies crashing your personal finances, some advisors will recommend at least three months’ worth of expenses in an emergency fund, but since abundance is the only guarantee of survival, a lot of advisors will go as far as saying you should have six months’ worth.
If and when an emergency does happen, you’ll be able to sleep at night, knowing that you planned ahead and can continue living your life undisrupted.
Building a fund appears to take on a different look, depending on age. The aforementioned survey by Bankrate.com shows that although they are approaching retirement, 32% of those aged 53 to 62 have no emergency savings, the highest among the different age groups. Many of these Baby Boomers may have lost their savings in the economic downturn or faced long-term unemployment. Those older than age 63 reported the lowest likelihood of empty savings, and 44% of them have enough savings to cover at least 6 months’ worth of expenses.
Surprisingly, the youngest Millennials, age 18 to 26, exhibited strong saving habits. Though many carry student loan debts, they are much less likely to rack up credit card debt or auto loans. They buy less things, and this might be because they saw their parents and older siblings experience the recession.
The good thing about that is Millennials have the great benefit of time being on their side, having more years ahead of them to accumulate savings. Baby Boomers could take a lesson from their younger counterparts.
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