The Dangers Of Not Having An Emergency Fund
BOSTON (CBS) - We'll cover more dumb money moves this week!
The Dangers Of Not Having An Emergency Fund
Almost 50% of Massachusetts residents have an emergency fund that will last them 3 months according to a study done by FINRA's Investor Education Foundation.
We currently rank number 5 in the nation, so if this was a contest we rock. This is definitely good news, but half of our listeners don't have an emergency fund. That's not a good thing.
Everyone needs an emergency fund. This is money set aside to be used for emergencies. When your income stops coming in or drops, you will need this money to keep paying your mortgage and buy groceries.
This is money to be used when you lose your job, the winds of a hurricane blows the roof off your house, or in the case of the Market Basket workers you all decide to join the picket lines. You need to plan for the unexpected and having an emergency fund allows you to do just that.
Experts agree that everyone needs an emergency fund, but they often disagree on how much you need in it. The conventional wisdom is to have at least three months' worth of living expenses set aside, and if you can do it, six months' worth stashed away is even better.
Three months of living expenses is not the same as three months of income. You need only cover the basics in your budget. You do have a budget don't you? What will it take to maintain your lifestyle, rent/mortgage payment, groceries, monthly utilities, childcare, insurance payments, etc? That's the amount you'll need.
If you are single or the sole breadwinner in a family, an emergency fund is extremely important because you don't have the luxury of a second income to cushion some of the emergency. My recommendations are as follows:
- Bare minimum for anyone: 3 months
- Children & 2 steady incomes: 3-6 months
- Children & 1 steady income: 4-6 months
- Children & no steady income: 6-9 months
Money Conference Alert!!
On October 11th I will be the key note speaker at The Money Conference which is a FREE one-day event presented by The Office of Massachusetts State Treasury. It will be held at UMASS Boston and the first 500 registrants will get a free copy of my newest book, Money, Your Personal Finance Guide.
There will be afternoon classes on everything from budgeting to buying a house. The Financial Planning Association of Boston will have volunteer financial planners there to help answer questions. You can set up a meeting with a Money Mentor when you register. If you have questions about the conference, contact Sheila O'Loughlin of the State Treasury at (617) 367-6900 ext 615.
