50% of Americans Have Under $500 in Emergency Savings. Here's How to Build a Safety Net ASAP

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  • You should have enough money in savings to cover at least three months of essential bills.
  • If you're nowhere close to that figure, you may need to change your spending habits and schedule to build some cash reserves.

You really can't afford to go without savings.

You never know when an unpleasant financial surprise might arise. You could be driving to work when bam, you run over a nail and need $200 on the spot to replace your tire. Or, you could wake up to a freezing cold house, only to realize your heating system has stopped working. The result? A $1,500 repair bill you need to cover within 24 hours (or otherwise suffer more frigid nights in your home).

It's for these reasons that having an emergency fund is crucial. Not only do you need a decent chunk of cash in your savings account to pay for unplanned bills, but you also need money in case you lose your job for a period of time.

In fact, many financial experts are convinced that we're headed for a recession in 2023. That could lead to a period of rampant job loss, so it's important to be prepared.

But recent data from Prudential reveals that many Americans aren't prepared. In a survey of younger and older Americans alike, 50% of all respondents said they have less than $500 in the bank, or no emergency savings fund at all. If that's the boat you're in, it's imperative that you do what you can to make a safety net quickly. Here's how.

1. Rethink your spending

Spending $50 on restaurant meals here and there, or $150 on concert tickets, isn't a terrible thing when your savings are in good shape. But if you can't even cover an unplanned $500 expense with money from your savings, it means you shouldn't be spending money on non-essentials. Instead, you should be working to get your savings to a place where you can pay for at least three full months of essential bills. And so now may be the time to stop spending money on things like cable and takeout, and instead put every spare dollar into the bank.

2. Get a side gig

Cutting back on spending might help you boost your savings. But if you're already living frugally, it may not help you complete your emergency fund as quickly as you'd like.

A side hustle might, though. That second gig could help you grow your earnings, and the more you earn, the more you'll have the potential to save. In fact, if your side hustle is a new income source altogether, it means your earnings won't be earmarked for existing bills. And that means you might be able to save every penny you earn (minus what you owe the IRS for taxes on that income, which you're unfortunately required to pay).

3. Bank any windfalls you get

Maybe you're getting a generous year-end bonus from your employer as a thank-you for a job well done. That's money that should go directly into your savings if you don't have enough cash on hand to cover at least three months of essential expenses. The same holds true for any other extra cash you get your hands on, whether it's holiday gifts or a tax refund in early 2023.

Going without emergency savings is a dangerous thing -- especially these days. Rather than run that risk, do what you can to boost your cash reserves and buy yourself some peace of mind as soon as possible.

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