Risky Business: 63% of Us Don't Have $500 to Cover an Emergency Car Repair Bill

Risky Business: 63% of Us Don't Have $500 to Cover an Emergency Car Repair Bill

Expecting the unexpected is easier said than done when it comes to our money lives.

For example, if your water pipes burst in the middle of the night, would you easily be able to pay for repairs? What if you needed to catch a last-minute flight to help a sick relative? Do you have the cash to book that trip?

Almost No Ready Money Available

While we hope to be spared those problems, emergencies do come up—and nearly two in three Americans aren't able to cover those costs upfront.

According to a new survey from Bankratemore than four in 10 respondents said they (or a close family member) experienced a major unexpected expense in the past year alone, and 63% of those surveyed said that their emergency funds couldn't cover a surprise $500 car repair or a $1,000 trip to the ER. Fifteen percent said they would have to use a credit card to get them out of trouble, and another 15% would borrow from a friend or family member.


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Even People With Higher Incomes Are Vulnerable

A lack of emergency savings spans across demographics, too.

The survey shows that even 46% of households earning more than $75,000 per year and 52% of college graduates couldn’t handle an unexpected emergency between $500 and $1,000.

Building an Emergency Fund

So what can you do to keep your head above water should you run into a not-so-fun surprise?

The best way to stave off forthcoming stress is to start an emergency fund, which should have somewhere between three to nine months of your take-home pay stowed away, depending on factors such as whether you have a family to support, how variable your income is, and whether you have a financial safety net in place (i.e., you've got relatives who can help you out in a pinch).

For example, if you've got no kids and don't own your home, three months may be a good goal to aim for; if you've got a full house and you're a freelancer, nine months may be a more suitable goal for your situation. For most folks, though, six months is a good rule to consider.

Starting an emergency fund might sound intimidating, but it's easier than you think. For one, start small: Strive to save at least one month of your take-home pay up before accelerating other financial goals you may have, then work your way slowly up to about six months. Also, take a look at your budget and see what small expenses you can trim to free up money that you can automatically transfer into a high-yield savings account each month—whether it's $25, $50, or $100, every little bit helps.

To learn more about getting to a safer financial place, read 5 Ways to Start an Emergency Fund. And if you're curious about what should be considered a financial emergency to begin with, check out 3 Ways to Tap a Rainy Day Fund.

RELATED: The One-Number Strategy: A New Approach to Budgeting


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