Strike A Chord: Saving for an Emergency
According to the National Endowment for Financial Education, every year there’s a 70% probability that an unexpected emergency—like a trip to the hospital or a car breaking down—is going to become an undue financial burden.
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Every New Year’s Eve, someone makes a resolution to save money.
But according to the director of the National Endowment for Financial Education, many people who make those resolutions don’t see them through. That’s why Paul Golden offers two important steps we can take to stick to those goals.
First, and most importantly, we can set achievable savings goals for ourselves.
Paul said that “So much of the language that’s out there in the financial planning world tells you that you want to have six months of your living expenses saved in an emergency savings account. If people look at that end goal they get really frustrated and they’re going to derail from that goal because it seems almost unachievable. So it’s important to start small, start early. Set a small, reasonable goal for yourself.”
Second, Paul says that it’s good to have a friend—a “financial buddy”—to help you stick to your savings goals.
“It doesn’t have to be somebody that you can share all of your financial information with, but it can be somebody who understands what your goals are, what you're trying to say are your priorities, and they can help hold you accountable to those goals," Paul explained. "So it's like going to the gym, it’s easier to do with somebody.”
Lastly, Paul says to make sure to actually use the emergency savings when needed instead of using a credit card and going into debt.