There's a reason we're all told to put money aside for emergencies. You never know when your car might break down, a pipe might burst at home, or your employer might inform you that you're suddenly out of a job. Without emergency savings, you'll most likely be forced to borrow the money you need to pay for an unplanned expense, and that could kick-start a very unhealthy debt cycle.
Unfortunately, new data from Bankrate reveals that 23% of Americans have no emergency savings whatsoever. And while it's easy to blame that statistic on excessive spending, there may be another culprit at play: student debt.
A burden for millions of Americans
You've probably heard a friend or two moan about having to make a monthly student loan payment. You might even have some outstanding educational debt yourself. But the student loan crisis has gotten so big that Americans now owe nearly $1.5 trillion, which is roughly $620 billion more than the total amount of outstanding U.S. credit card debt. And while the average Class of 2017 graduate came away with $39,400 in debt, there are countless Americans who are on the hook for double or triple that amount.
It's not surprising, then, to learn that 55% of adults with student debt say it's preventing them from building emergency savings, according to data from Prudential Financial. After all, it's hard to set money aside for the unknown when you're losing hundreds of dollars each month to a loan payment right off the bat. Still, it pays to make an effort to build that safety net while keeping up with your student loans, because if you don't, your debt problem could easily get worse very quickly.
Eking out some savings
When you're saddled with student debt, finding a way to save money often boils down to slashing expenses. If you're struggling to save for emergencies, it's time to revisit your budget and find ways to cut corners, even if temporarily, to allow for some degree of savings. That could mean eliminating restaurant meals, canceling your gym membership, or even taking more drastic measures, such as downsizing your apartment. But if you don't do something, you'll remain vulnerable in the face of an unexpected bill.
Another option you should strongly consider is getting a side hustle. Though working a second job may not be ideal, it's a good way to generate extra cash to not only build your emergency reserves, but also pay down your debt faster. And if you're thinking you'll be looking at a mere $20 per week from that side hustle, think again. Of the 44 million adults who currently hold down a second gig, 25% earn over $500 a month as a result. If your current monthly expenses equal $3,000, and you're looking to save $9,000 (keeping in mind that three months' worth of living expenses is generally considered the minimum for a solid emergency fund), earning $500 a month from a side hustle could get you to your goal in just a year and a half.
Like it or not, not paying your student loans really isn't an option. But ignoring your emergency savings is a dangerous move as well. And while you might find it difficult to sock away cash when those debt payments monopolize a chunk of your income, you'll need to overcome that challenge if you want to stop living on the edge and finally be financially secure.