Financial emergencies can happen to anyone at any time. Your car could break down, a pipe could burst in your home, or you could find yourself in the hospital with a seemingly never-ending series of bills to follow. That's why having emergency savings is so important. Yet 54% of Americans aren't equipped to handle a financial emergency, according to KeyBank's Financial Wellness Review, which captured data from over 35,000 U.S. adults.
How much should we all have in emergency savings? Ideally, enough money to cover at least three months of essential living expenses, and more ideally, enough to pay for six months of necessary bills. Yet over half of Americans don't have enough money to cover an emergency at that level. If you're one of them, it's imperative that you work on building some cash reserves -- before you're forced to borrow money and rack up debt to cover a financial shock you never saw coming.
Boosting your savings
If your savings aren't looking particularly healthy, you must prioritize your emergency fund above all else. Otherwise, you could get stuck racking up some serious credit card balances in an effort to keep up with unplanned expenses that can't wait.
To start, create a budget that maps out your current expenses. Then, see which ones are causing you to neglect your savings, and work on reducing them. For example, if your rent costs you $1,400 a month but your building is loaded with amenities, try scaling back to a smaller space with fewer perks. It's a worthwhile move if it saves you $400 on a monthly basis. Similarly, if you're in the habit of dining out frequently or ordering takeout three nights a week, pledge to cook at least half of those meals at home. Doing so could save you a huge chunk of cash, and that's money than can go into your emergency fund.
Another good way to boost your cash reserves is to get yourself a second job on top of your main one. An estimated 45% of Americans have a side hustle today, and if you're willing to put in the time, you could build savings without having to cut back on as many expenses.
Best of all, that side hustle can be just about anything you want it to be. If you're OK with waiting tables at a local restaurant or working a retail gig on weekends, then go for it. Otherwise, get creative. Turn a hobby you enjoy into a business, whether it's baking, jewelry making, or photography. In fact, the more flexible your side hustle, the easier it'll be for you to maintain it -- and the less you'll wind up resenting having to work those extra hours.
You need emergency savings to tackle life's unknown expenses. If you're among the more than half of Americans without adequate cash reserves, it's time to do better. Otherwise, you risk damaging your finances the next time a large bill pops up and you don't have the ability to pay.