Most Americans Need Two Years to Save a One-Month Emergency Fund

Building an emergency fund is one of the best ways you can prepare for an unexpected expense. Unfortunately, multiple unexpected expenses will come and go before the average person manages to establish a savings account. 

According to the Economic Hardship Reporting Project director Alissa Quart, the average household making between $50,000 and $69,000 would need more than two years to save just one month’s worth of living expenses. At this rate, the average household would need more than a decade to save the preferred six-month emergency fund. 

A lot can go wrong in two years, let alone a decade — from cracked teeth to broken taillights. While you might not face these issues, most people deal with some kind of emergency more often than you think. According to, nearly half (46%) of Americans face at least one unexpected expense in a 90-day period — many of them face more than one.  

Slow Savings Leaves You Unprepared

Slow savers are at a significant financial disadvantage in life. While you work hard to build an emergency bit by bit, you’re vulnerable to unexpected auto, household, and medical expenses. 

Study after study reveals even minor emergencies have caused trouble for people over the past decade. In 2013, the Federal Reserve reported that 40% of Americans would struggle to pay for an unexpected $400 expense. The latest report shows more people have savings roughly ten years later — but only just, as 32% of US households still can’t afford a $400 emergency expense. 

Handling Emergency Expenses with Low Savings

Unfortunately, life can deliver an unexpected expense before you’re ready. Maybe your car needs new brake pads and rotors, or you desperately need to fill a prescription to fight off a virus.   

Those polled by the Federal Reserve say they would have to borrow money to cover these surprise expenses. In these tough situations, you may lean on online direct deposit loans as emergency money. Many people depend on direct deposit loans because they arrive directly in the borrower’s preferred account, making it easy to receive and access funds under a time crunch. As installment loans, direct deposit products are also never due in one lump sum, so borrowers have more time to come up with payments.

Like any installment loan or line of credit, direct deposit loans can be very expensive. So what are installment loans and their costs? You need to contact a lender for more information on their rates and terms, as this varies from one loan to the next. But generally, all lenders apply some interest and finance charges to their loans. 

When the choice is between ignoring an urgent auto repair and taking out a direct deposit loan, these costs may be worth the funds. If you rely on your car to get to work every day, for example, an online loan could minimize the emergency by repairing your car before you miss work and pay.   

How to Accelerate Your Savings for a More Robust Emergency Fund

For answers to this burning question, let’s look at the 50/30/20 budget. This popular budgeting style recommends you split your take-home pay between three major areas of spending: essentials, wants, and savings. Your essentials take 50 percent of your income after taxes. That leaves 30 percent for wants and 20 percent for savings.

Track your expenses to see how you compare to these benchmarks. This exercise can help you understand why you don’t meet your 20-percent savings goal. 

If your wants take up an unfair share of your take-home pay, you know that overindulging in discretionary spending steals away your savings power. Review non-essential spending to see where you can cut down — overlapping streaming services, takeout, and the infamous daily latte are common money-wasting culprits. You don’t have to cut out everything that brings joy to your life, but you should limit your spending to the 30-percent guideline.

But what if your needs take more than their 50 percent? If the cost of living prevents you from following this budget, you need to focus on how you can simultaneously increase your earnings and reduce your essentials. 

What would you have to do to earn more money? Consider investing in classes, networking, and volunteering in ways that improve your skills. 

In the meantime, try these tips to reduce your essential bills. 

  • Housing Costs: Downsizing or moving to a cheaper neighborhood promises long-term savings.
  • Groceries: You can still save money by meal planning around weekly flyers, coupons, and shelf-stable pantry items. 
  • Utilities: By reducing your consumption with these energy tips, you can reduce your regular energy bills.
  • Insurances: Comparison shop between different insurance companies. According to Consumer Reports, 39% of homeowners who switched carriers did so because they found a better price.
  • Minimum Payments: If you have outstanding lines of credit and credit cards, focus on making more than the minimum. Minimum payments prolong debt that ties up your paycheck and, more importantly, adds more to what you owe in interest and finance charges. 

Bottom Line:

Timing is everything. If you manage to save before you encounter an unexpected expense, you can handle this emergency out of pocket without direct deposit loans. So, what’s stopping you from saving like you should? Check in with the 50/30/20 budget to see what’s delaying your emergency fund and fast track your savings.

Featured image by Dany Kurniawan via Pexels

This post was authored by an external contributor and does not represent Benzinga's opinions and has not been edited for content. This contains sponsored content and is for informational purposes only and not intended to be investing advice.

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