Earlier this week, the Real Time Economics blog at the Wall Street Journal did a fascinating story on National Bureau of Economic Research paper that states that nearly half of American would have difficulty coming up with $2,000 to deal with an emergency, even if they had 30 days to do find the money.
It is an interesting look at how savings is important, and it ties in perfectly with our Back to Basics Week Five focus on Savings.
$2,000 is a lot of money, but it is also how much it might cost to deal with a huge variety of basic emergencies. $2,000 is roughly the amount necessary to help pay for:
- a car transmission
- a new hot water heater, including repairing the damage when the old one leaked
- an average trip "home" for a military family who needs to attend to a family emergency
- an extensive dental emergency
- security deposit and first month's rent on a new apartment
- insurance deductible plus interim transportation after a car accident
- funeral expenses
- serious veterinarian bills
The fact is, we all need to have a stash of funds for unexpected expenses. There are lots of Americans who have lost their jobs, or have racked up huge medical bills, and for them it would be really hard to build up their savings. However, if you have any reasonable income coming in, then you need to make saving a priority. Anyone who is on Active Duty has enough income that they should be able to create emergency fund, even if they can only contribute $20 a month. Every little bit helps.
This article is part of Week Five of our Back to Basics series. Not sure where to start building your financial foundation? Join us!
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