One of the cornerstones of good financial planning is saving for emergency situations. Unforeseen expenses can have a devastating effect on the personal finances of Americans. A recent story on CNBC highlighted how widespread the issue is by noting only 39% of Americans said they had sufficient savings to cover an unexpected setback of $1,000.
The problem is particularly acute for young parents. Even setting aside nightmare scenarios like a health crisis or sudden injury, children have any number of needs that can be hard to predict, and present a significant financial burden when they arise. Unfortunately, because most young parents generally have less of a financial buffer, they are also the least likely to have extra money available to put into savings. Fortunately, there are things even the most cash-strapped parent can do to put away money for a rainy day. Here are a few tips on how you can plan your finances to avoid getting blindsided.
When It Comes To Saving, Start Small
One of the things stopping most Americans from saving money is the feeling that they need to start big. While setting major goals is an important way to keep yourself accountable, saving is just as much about building good habits. Even starting with a couple of dollars a day — or the price of a coffee — will yield around $60 a month and over $700 a year. This doesn’t sound like a lot, but it is a helpful step toward bigger things.
Don’t Use Your Savings Unless You Absolutely Need To
Once you’ve started saving, and are watching your money slowly accumulate, the next challenge is to make sure you don’t spend it. Watching your savings disappear can be a disheartening experience. A shrinking savings account often stops people from putting away money, so if at all possible, don’t touch your savings for anything short of an emergency.
One thing that can help in a pinch is a short term loan from an online lender like MoneyKey. Online lenders provide small, hassle-free loans through the Internet and can make a huge difference in situations where unexpected expenses leave you scrambling to cover your bills and payments. They can also keep you from plundering your savings account every time you are a little short, and make sure it’s there for you when you really need it.
Be Realistic About Costs
One of the most common mistakes people make when financial planning is not accounting for large expenses that may only occur a couple of times a year. It’s easy to forget that your car will probably need maintenance, you may need to replace an appliance, and there is a good chance one of your children will need their wardrobe overhauled at some point because none of their clothes fit anymore. When all these things happen at the same time, it can precipitate a financial crisis. Being realistic about costs will help you foresee and prepare for some of these unexpected expenses.
As any parent knows, having children means being regularly confronted with surprises. Some of those surprises are wonderful — others, less so. Even the thriftiest parents will occasionally be confronted with expenses for which they haven’t prepared. For American families struggling to make ends meet, it is more important than ever to keep unexpected costs contained with proper planning and a healthy attitude toward saving.