Most Americans Have $41,000 in Savings – How Do You Train? | Ali Akram
The average American has a whopping $41,600 sitting in bank savings accounts, according to the latest Survey of Consumer Finances (SCF).
This impressive factoid paints a flattering picture of personal finance in the United States before the pandemic. But in reality, this overshadows a more accurate representation of most Americans’ ability to save.
A different side of the data collected by the Federal Reserve shows that the median is much lower. The median, which represents the most central number of all the bank balances involved in the study, indicates that the average does not tell the whole story. The median savings balance of just $5,300.
Three years into the pandemic, the country’s savings are on a rocky road. Another survey of 1,000 American households found that more than half of all Americans are so poor in savings that they cannot cover an unexpected $1,000 expense.
What if you don’t have an emergency fund?
Without savings set aside for emergencies, you’re vulnerable to any unexpected expenses you can’t plan for. Car problems, health issues, or home repairs are frustrating for anyone dealing with these issues, but they become real emergencies when you don’t have the money to fix them.
With your emergency fund empty, online loans may be the only way to handle an unexpected car repair or medical bill. Financial institution MoneyKey describes online loans as a way to bridge the gap between your paycheck and a pressing issue.
If approved, online loans advance you the funds you need to take care of your business. But like all short-term personal loans, online loans via MoneyKey come with rates and fees that you will have to repay in addition to your loan amount.
It’s the cost of borrowing online or in person, but that’s why online loans never outweigh savings. A solid emergency fund gives you the luxury of handling repairs on your own, so you can avoid the interest and finance charges that come with the average online loan.
How much savings should you have in your fund?
Having an average of $41,600 in your emergency fund would make your life easier, but it may not be realistic. As a general rule, you should aim to save up to three to six months in living expenses for emergencies. This amount is large enough to help you cover minor expenses or short absences from work.
Some advisers, however, recommend doubling this target up to 12 months. At this size, an emergency fund gives you a safety net for longer-term problems. You’ll have a year’s worth of money to fall back on in case you’re sick in the hospital or have to take time off work to care for a sick loved one.
Use a budget to track and reduce expenses
Whether you’re aiming for a three- or 12-month goal, a budget is your best bet for saving money. Track your spending to see where your money is going each month. You may need to avoid unnecessary splurges to free up enough money to save.
As many restrictions are lifted on entertainment and travel, it’s important that you don’t let these non-essential expenses blow away with your budget. You will have to sacrifice these things to save more.
find more income
You can only cut so many expenses before you end up with the essentials you can’t live without. If you’re living on such a meager budget that you still can’t save, it might be time to consider increasing your income.
Traditionally, this would involve asking for a raise or doing what you need to do to qualify for higher paying jobs. But there’s also the option of monetizing a hobby or skill to earn more money with a virtual side gig.
According to Budget 50/30/20you should aim to save up to 20% of your monthly income, spread over all savings goals, including retirement and an emergency fund.
Although it can be a challenge, the savings are significant. Having money on hand to handle emergencies without borrowing online gives you greater financial freedom