How much savings do you have socked away for a rainy day? If you only have a couple hundred sitting in an account, you might feel as though you’re falling behind.
It doesn’t help that the US Federal Reserve revealed its latest numbers on the state of savings in the country. According to the Survey of Consumer Finances, the average American has a stunning $41,600 squirreled away in savings.
In such a stark contrast to your savings account balance, this overwhelming average can leave you feeling inadequate and envious. You could do a lot with more than 40 grand sitting in an account somewhere, ready to help in an emergency. But can you ever get there? Let’s find out.
First of All, Don’t Believe the Hype
While the average savings account balance is $41,600, the median (or the center-most number in a set of data) tells a different story. The median savings account balance is just $5,300.
How can there be such a tremendous discrepancy?
A huge chasm separates these two figures because of the way averages are calculated. The average includes all those one-percenters who are incredibly wealthy. While they may be few in number, their enormous bank balances overshadow the majority of people with smaller savings accounts.
When the median is much lower than the average, you know that most people fall below the average.
In other words, you aren’t the only one who isn’t sitting on a stockpile of money. In fact, another survey shows nearly 20% of Americans didn’t save anything at all last year. Meanwhile, 6 in 10 Americans wouldn’t be able to cover an unplanned expense of $500 or more.
What to Do if You’re Fielding an Unexpected Expense Right Now
Your water heater springs a leak, your dog eats a bar of chocolate, or your brakes are starting to go. These unexpected expenses and repairs can wind up costing more than your emergency fund can handle right now.
Unfortunately, they aren’t the kind of expenses you can put on hold until you save up enough money. You need to handle them now to have hot water, save your dog, and drive your car to work.
If you fall short in an emergency, you can find short-term personal loans online that act as a stopgap until you rebuild your savings. The best short-term loans are quick and convenient, so you aren’t wasting time or energy filling out applications in the middle of a crisis.
You can find loans online by opening up your favorite search engine and typing in this phrase: online loans near me. This gets your search off to a good start, as it narrows down the seemingly infinite options online. You’ll have a better chance of finding an online loan that you can qualify for and avoid those that aren’t available in your area.
During your search, carefully compare rates and terms between lenders. These details let you know how much your online loan will cost once everything is said and done. You’ll want to make sure you can afford to pay it all back by the due date.
How Much Should You Save for the Next Emergency?
The golden rule of emergency funds is to save between three to six months of living expenses. If you can achieve this goal, you’ll have a sizeable chunk of cash to handle unexpected expenses and short-term absences from work.
While it may not be $41,600, six months of expenses may still work out to be a daunting number. If you feel overwhelmed by this goal, experts recommend focusing on starting small.
Rather than worrying about your end goal, focus on what you can put away today. Whether that’s $25 or $250 a month, make sure it’s consistent.
After all, no savings account magically appears overnight. It’s the work of consistent contributions over time.
What Can You Do to Save More Money?
If you’re ready to maximize your savings, try out these tips. There’s something for everyone below:
Make a Budget: It’s hard to prioritize savings when you aren’t sure how you spend your money each month. Sit down and track expenses to understand your cash flow.
Follow the 50/30/20 Rule: The 50/30/20 method gives you guidance on how to spend your money by allocating 50% of your income to the essentials. That leaves 30% for wants and 20% for savings.
Cut the Unnecessary: If you’re having a hard time hitting that 20%, look to your unnecessary spending to see what you can cut. Unused subscriptions, streaming services, takeout, and online shopping are easy targets.
Tweak Your Essentials: You can’t eliminate your needs entirely, but you can spend less on them. Shop around for cheaper insurance, follow a meal plan to reduce groceries, and carpool to save on gas.
Put Your Savings in a High-Yield Account: You’ll earn more interest on your savings when you switch to a high-yield account. Just make sure there aren’t any limits that delay how quickly you can withdraw cash in an emergency.
It’s easy to compare yourself to others and lose motivation when you fall short. But saving money at a time of record-breaking inflation and shrinking paychecks is hard enough. Don’t make it any more challenging by believing the hype of misleading stats.
Instead, focus on what you can do in the here and now to boost what you save — even if it’s just by cutting a $10 streaming subscription to a channel you never watch. These small savings add up!