As I write this, we are in the middle of a global crisis. COVID-19 has engulfed the planet. Hundreds of thousands of people have been inflicted resulting in thousands of deaths. Not only is COVID-19 wreaking havoc on the lives of countless people across the world, it has also wrecked national economies. Businesses have lost millions in revenues. People have lost their jobs, have been forced to take unpaid leave or have had their paid hours cut back.
The U.S. gig economy has been tested like never before, and is showing signs of buckling under the pressure, as unemployment in the U.S. has hit all time highs. To buoy this sinking ship, the federal government has crafted a massive bailout.
Still, those living paycheck to paycheck are in deep trouble. According to a 2017 study, 40% of Americans couldn’t come up with $400 to cover an unexpected expense. This does not bode well for those workers affected by COVID-19.
But the Citizens of Moneyland should easily be able to weather this economic storm. We citizens understand that we need an emergency fund to cover at least 1-3 months of living expenses, ideally 3-6 months. This is a high impact directive. Our realized citizens will have at least 3-6 months of living expenses saved.
Directive: You Need an Emergency Fund
Why is this important? Because it’s critical financial insurance against the uncertainties of life. Insurance against all the COVID-19 crises, the car repairs (or fires), the puppy’s vet bill, the inevitable surprise medical expense, and the myriad of other unexpected bills that pop up without warning.
COVID-19 and life’s other emergencies will hurt less if you have the financial security to protect against them. An emergency fund is an essential blanket you need to weather life’s storms. It is a must have and a prime directive of our leader. Fully realized citizens of Moneyland will have an emergency fund of at least 3-6 months.
How much should I save?
Start small. Fledgling citizens may try to save up at least 1-3 months of your essential monthly spending. This includes rent, food, debt obligations, and utilities with a little extra cushion just in case. Fully realized citizens should have at least 3-6 months saved.
Where should I keep this emergency fund?
Not under your mattress. Any cash not earning interest is eroding away to nothing with the endless march of time and it’s right hand man – inflation. Keep your emergency fund in a high interest savings account, such as Ally. Sure, you can also keep some cash under your mattress too, just in case. Regardless of where you put it, your money needs to be liquid – readily accessible cash you can get on short notice.
But I can’t possibly save $1000s?!
That’s ok. Start small. Try a $500 or $1000 goal at first. But, you will not be a fully realized, financially independent citizen of Moneyland until you have at least 3-6 months of living expenses saved. You will feel better when you do. Trust this directive.
Your fearless leader,
Don’t agree with your leader? Have some thoughts about emergency funds? Comment below.