PENNSYLVANIA, USA — Last year showed us just how important it is to have savings to fall back on when something you don't plan for happens. According to a new Bankrate.com report, more than half (51%) of Americans don't have enough money in their savings to get them through three months of an emergency.
"After my time in the industry, I'm not shocked," Lee Fortenberry, Assistant Finance Professor at Shippensburg University, said.
He says there are three things to keep in mind to help you prepare financially for the unexpected.
First, make sure your insurances are in order.
"It doesn't sound very fun to talk about insurance but it's important to make sure your insurances are in order because this is ultimately a product that happens when there's an emergency," he said. "So, whether auto, home, renter or worse, disability, or life insurance, make sure your insurances are in order."
Second, build your savings before worrying about your 401(K)
"The retirement burden over the last 30 years has totally shifted to the individual as opposed to companies cause so many companies now have gotten rid of their old pension plans and so forth, so really the burden is on the American people to save," Fortenberry said. "And we need to really focus on building emergency plans before 401(K) contributions."
Third, focus on putting money into savings, vehicles like money market funds, where you don't have immediate access through an ATM or debit card.
"We don't want a debit card to tap into this account, we don't want to, if we're cash people, we don't want to be able to go to the ATM," Fortenberry said. "We want to have to do something more to get money out."
Fortenberry says he now advises people to have at least one years' worth of savings in an emergency fund, especially now after seeing the impact the pandemic had on millions of Americans.