Bankrate’s January Financial Security Index survey reveals that just four in 10 U.S. adults (41 percent) could cover the cost of a $1,000 car repair or emergency room visit using savings. This is not surprising, since we have been hearing about these reports for years now. The amounts used to be $3,000 to $5,000. I have seen an article with a lower threshold, $350, with the rate only slightly higher for those who have it available.
It is scary that over half of all American’s are that close to the edge with their finances. I know that years ago at one point, I was close to the edge, we just bought a house and my wife was pregnant with our first, with my job was slated to be eliminated. We had $345 in the bank…
We have gotten past that point in our lives, but it was a scary time.
For many American’s this financial instability is a necessity, that they make so little money that it is hard to cover basic expenses. But for a wealth of others it is a choice. Way too many people out there see no need to build up a substantial financial cushion because they have a tremendous amount of faith in the system and the stability of their employment.
But, cars breakdown, accidents do occur and there is always the threat of a major illness. So a financial reserve should be in place for basic protection. Banks, credit cards and lines of credit seem to have a habit of shutting down or evaporating just when you need them the most.
Plan ahead for your own emergency. Too bad if it hurts and you can’t do what you want, when you want, but get the reserve in place. This is of course assuming that you the financial resources to do something beyond basic survival. Imagine your car breaking down and having to come up with $1,200, then the next month your furnace goes, and you must replace that. Will you have heat in your home that month?