Stormy Weather: Are Americans Prepared for a Rainy Day?

STORMY WEATHER: Are Americans Financially Prepared For a Rainy Day? The start of a new year is the quintessential time to roll out a fresh financial plan. One of the more overlooked necessities of financial planning is the rainy day fund. Experts recommend you have at least six months of easily-accessible savings set aside in the case of an emergency. Learn how Americans are doing in this department, as well as how to go about setting money aside for this important fund. How Many Months' Savings Do Americans Have? How much do you have in emergency savings-that is, money that is readily available in a checking account, savings account or money market? 24% 6 MONTHS OR MORE 24% NO EMERGENCY SAVINGS *8% Only 10% of those under 30 have six months' or more worth of expenses saved. 15% of those 65 and older 22% 3 TO 5 MONTHS' EXPENSES 22% LESS THAN 3 MONTHS' EXPENSES have no emergency savings *DON'T KNOW/REFUSED Are Americans Able To Cope With Unexpected Expenses? One study, upon asking the following survey question, determined who in each demographic is able to to cope with unexpected expenses. How confident are you that you could come up with $2,000 if an unexpected need arose within the next month? All Respondents Income 24.9% CERTAINLY ABLE 56.8% of those making less than $20,000 say they're 25.1% PROBABLY ABLE certainly not able to come up with $2,000 if needed. with nearly 25 million households making $20k or less 22.1% PROBABLY NOT ABLE each year, that is a significantly large portion of the population who are unprepared 27.9% CERTAINLY NOT ABLE 100% .............. P Education 80% 60% Nearly 1 in 6 college Graduates say they are certainly not able to come up $2,000. 40% 20% HIGH SCHOOL OR LESS TRADE SCHOOL SOME COLLEGE COLLEGE (BACHELOR'S DEGREE) GRADUATE EDUCATION The North-East has the highest percentage Region Age of people who feel they could come up with $2,000; however the region also has the highest percenatge of those who are 100% certian they wouldn't be able too. The only age group with a majority who 80% feel certianly able to come up with $2,000 are those Americans age 55-65. 60% WEST MID-WEST SOUTH NORTH-EAST 15.2% 24.6% 22.2% 28% 40% 27.9% 23.3% 21.3% 27.6% 23.5% 25.3% 22.7% 28.4% 20% 23.2% 27.3% 21.8% 27.7% AGE 18-34 AGE 35-54 AGE 55-65 Just 15.2% in the West are certain they could come up $2,000. How To Build a Rainy Day Fund As with any savings fund, it takes time to get to where you should be. Take the following steps to assure that you are prepared when the storms of life roll through. 1. 2. Determine your bottom line monthly expenses and multiply each by the Create a plan for putting your money away. number of months for which you wish to save. While experts recommend Find a savings calculator that factors in things like: you have six months' worth of savings stashed away, it is better to begin by STARTING BALANCE aiming for a less daunting sum. To calculate, fill out the following worksheet: AMOUNT YOU EXPECT TO CONTRIBUTE EACH MONTH EXPECTED RATE OF RETURN* Mortgage/rent for one month x 3 = $ *Remember, you want these funds to be easily accessible in the case of emergency. Consider a money market account or just a basic savings account. EXPECTED FEDERAL AND STATE TAX RATE Auto loan for one month x 3 = $ Utilities for one month x 3 = $_ 3. Now it's time to start saving; Transportation for one month, x 3 = $ remember, slow and steady wins the race. Groceries for one month x 3 = $. Great work! You and your family are now prepared for a rainy day Other debts for one month x 3 = $ Total for 3 month emergency savings account = $. source: bankrate.com brookings.edu mint.com