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Why You NEED an Emergency Fund! - YouTube
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if you had an emergency and needed to
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come up with $400 right now could you do
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it
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shockingly nearly half of Americans said
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they couldn't which is another way of
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seeing that nearly half of Americans
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have no financial flexibility or freedom
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while it might not be the flashiest or
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most exciting financial goal an
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emergency fund is the foundation your
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entire financial health is built upon
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without it it's just a matter of time
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before an unexpected jolt causes a crack
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that will eventually bring the whole
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house down we recently asked you our
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amazing two cents community to share
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your real-life stories about how an
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emergency fund or lack thereof has
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impacted your lives and you really came
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through so let's learn from each other
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what not having savings is truly costing
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you and pick up some tips for finally
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making it a reality
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[Music]
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Rose and her husband were in the
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military making decent money as she
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finished up college unfortunately they
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didn't see any real need to save any of
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it so the day Rose was supposed to leave
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for a study abroad program her husband
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totals their new car on the way to the
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airport rendering them both carless and
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cashless so what have you found yourself
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in a similar situation how much money
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could you save by having a proper
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emergency fund if your car decides to
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kick the bucket I think it's time to run
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the numbers
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let's assume you are for lack of a
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better word average most people when
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buying a car buy used with an average
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purchase price of twenty thousand eighty
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four dollars you've also got the average
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American credit score of 673 and what's
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the most common car loan length of 72
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months running this scenario through a
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big named bank gave me an AP our
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estimate of seven point nine four
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percent that means you'd be potentially
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paying a gobsmacking
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five thousand dollars an interest alone
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over the lifetime of that loan if you or
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they had had even a little bit of an
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emergency fund you could have
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potentially afforded a shorter loan term
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gotten a better interest rate or maybe
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even skipped out on interest all
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together and just bought a cheaper car
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in cash all of which could have saved
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you hundreds if not thousands of dollars
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another common unexpected expense you
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guys talked about were house repairs
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poor Breanna and her husband woke up on
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one of the coldest days in winter with
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flames shooting from the back of their
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furnace thankfully they had 3500 in
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savings to keep frostbite at bay but
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what if they had approached it like most
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people would and put those repairs on a
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credit card treating your credit cards
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like an emergency fund is like trying to
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use one of those weighted workout vests
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as a lifejacket with the average current
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credit card interest rate at nineteen
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point two four percent financing a vital
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repair like that could have cost them an
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extra six hundred and seventy three
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dollars even if they managed to pay it
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off in one year that number could have
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easily climbed into the thousands if
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they stretched it out over a few years
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but the lack of an emergency fund can
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cost you more than money after a year of
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battling an illness one of our YouTube
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community members almost Lindsay ended
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up needing an emergency surgery
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thankfully she had decent health
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insurance so it shouldn't have been a
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big deal the problem was she'd already
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used up her sick leave at work so the
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time she'd be spending in the hospital
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would also be no paycheck time without
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emergency savings and no access to
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credit because of her lack of income she
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was forced to beg friend
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and family to help recover basics like
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rent and food until she could get back
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to work she recalled the whole situation
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being both stressful and humiliating and
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has worked hard to save up a cash
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cushion in the time since then there's
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Ashley who said having an emergency fund
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may have saved her life she had a
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suspicion that she might be suffering
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from sleep apnea but quickly learned
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that the testing and equipment involved
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wouldn't come cheap
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she said that having her emergency fund
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gave her the confidence to schedule an
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appointment with her doctor thank
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goodness she did
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turns out tests showed her hunch was
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correct and the lack of oxygen during
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sleep had been significantly taxing her
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heart thankfully she told us after a
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six-month treatment she's doing much
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better yeah I'm sure you're thinking I
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get it Phillip and Julia I need an
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emergency fund but how do I get one here
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are our favorite three tips to start
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laying down your financial foundation
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the right way tip 1 pick a specific
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number most experts agree that a fully
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funded emergency fund should have
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between three and six months of expenses
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this number isn't just based on bills
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and rent but also flexible expenses like
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groceries medications and transportation
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that is typically enough to pay
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deductibles on your health or auto
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insurance and could also potentially
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handle a major transition like a sudden
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move or a critical home repair tip to
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get organized now that you have a
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savings target in mind
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set your money for this goal apart in
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some way if your savings for emergencies
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a new phone and your brother's bachelor
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party or smashed together in a general
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savings bucket you're sabotaging
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yourself get clear on what money is for
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true emergencies and give it a special
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home tip 3 sprint sometimes to get
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something you've never had you'll have
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to do something you've never done
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try challenging yourself to a spending
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freeze cut back on every non-essential
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expense and hustle for any extra income
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you can for just one month seriously
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cancel all your subscriptions tell your
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friends you're sorry you can't go see
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the new Marvel movie and read comics at
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the library instead remember it's just
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for 30 days see how far you can get
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towards your goal then maybe take a week
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or two break to catch your breath well
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for a nice meal or two then hit it hard
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again until you're done now Congrats
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you're making it all the way to the end
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of the video because we're going to
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share a powerful little secret with you
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saving up for an emergency fund requires
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you to be intentional focused and to
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live below your means which are the
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exact same financial muscles it takes to
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ultimately build well so when you're
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finally done with this goal awesome
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take those mad money muscles you just
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earned and use them to build something
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amazing on top of the foundation you've
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just laid down and that's our two cents
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thanks to our patrons for keeping two
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cents financially healthy click the link
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in the description if you'd like to
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support us on patreon
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[Music]
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