31% of Consumers Have Made This Mistake With Their Emergency Savings
It's a mistake you really don't want to fall victim to.
- A recent survey reveals that nearly one-third of consumers have tapped their emergency funds to pay for holiday expenses.
- There are better ways to get your hands on the money you need, such as using credit card rewards.
Having money in your savings account for unplanned bills could spare you from going into debt when surprise expenses arise. In fact, as a general rule, it's a good idea to sock away enough money to cover three to six months of essential expenses. That way, you'll have adequate funds to tap if you lose your job, have a sudden home repair, or get hit with costly medical bills following an injury or illness.
But one thing you shouldn't do is raid your emergency fund when non-pressing expenses pop up. That means your emergency savings should not double as a cash source for holiday spending purposes.
In a recent TD Bank Survey, 31% of respondents admit they've tapped their emergency funds for holiday expenses. But that's a dangerous move. If you go that route, you may not have enough money left over for when actual emergencies strike. If you need extra money to cover your holiday purchases, here are some better ways to get it.
1. Cut back on non-essential spending
The less money you spend on unnecessary purchases, the more you'll manage to free up for holiday spending purposes. Imagine you typically spend $100 a month on cable and streaming services. Well, December may not be the best month to do that. If you cancel those services temporarily, you'll free up that much more money to spend on things like gifts and travel. If you're busy enough during the holidays, you may not even miss having access to that entertainment.
2. Get a side hustle
You may only have so much money in your paychecks to allocate to holiday spending. Rather than tap your emergency fund, you can try boosting your income with a side hustle.
There are plenty of job opportunities you can explore that could put extra cash in your pocket. If you want a flexible gig, see if there's work you can do from your laptop, or try driving for a ride-hailing service. If you want more guaranteed income, apply for a seasonal job at a local retailer. Many stores need more hands on deck this time of year, so you may have a pretty easy time scoring some evening and weekend shifts.
3. Cash in credit card rewards
If you have a nice rewards balance on your credit cards, now may be a good time to use it. You can redeem your rewards for cash back that you can use to make holiday purchases, or use your reward points directly at merchants that accept them.
Tempting as it may be to dip into your emergency fund to pay for your various holiday expenses, it's a move you might regret. Remember, there's always the option to buy less lavish gifts or simplify your holiday decor. But if your car goes out suddenly and you need to come up with the funds to fix it, that's an expense you can't put off or ignore. It's important to make sure you keep your emergency savings well-funded -- and avoid raiding that account for non-emergency purposes.
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