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from the there's-always-the-day-*after*-tomorrow dept.
Economists say this is the Minimum Amount of Money you Need in an Emergency Fund:
Money experts generally encourage you to set aside three to six months' worth of living expenses in an emergency fund. Some even want you to stash away a year's worth.
After all, life doesn't usually go as planned: There could be another recession, you could lose your job, have a medical emergency or have to deal with a car breaking down. That's why, when it comes to emergency savings, "more is always better," personal finance author David Bach says.
But economists Emily Gallagher and Jorge Sabat challenge the oft-cited savings rules in their 2019 report, "Rules of Thumb in Household Savings Decisions." "People are usually given really high savings thresholds, like you should be saving six months' worth of income or you should have $15,000 squirreled away," Gallagher tells CNBC Make It. But those numbers aren't "based on much," she adds.
After crunching the numbers, Gallagher and Sabat found a more realistic amount for low-income households, specifically, to aim for: $2,467. If you have that much saved, your probability of falling into financial hardship (not being able to pay rent, bills or medical care) is low.
To get to that number, Gallagher and Sabat, who are also assistant professors of finance, used data from the Survey of Income and Program Participation (SIPP) to graph the relationship between falling into hardship in the next six months and how much you have saved as a buffer. They looked at financial information on more than 70,000 lower-income households, which the report defines as those earning under 200% of the poverty line. To put that into context, that's up to about $30,000 a year for a family of four, says Gallagher. This group represents "about 30% of the U.S. working-age population," she adds.
They found that if you have very little saved — say $200 to $500 — each additional dollar you set aside dramatically reduces your likelihood of falling into financial hardship. But once you have at least $2,467, "all of a sudden, saving an additional dollar didn't seem to be that helpful anymore," says Gallagher. "It still reduced your probability of falling into hardship a little bit, but it wasn't nearly as effective as when you were at low levels of savings."
(Score: 2) by The Mighty Buzzard on Tuesday October 22 2019, @01:57PM (7 children)
Bullshit. Nobody living on the edge of fucked is on the exact edge. Which means they can trim at least a little bit of luxury to create a buffer to keep them from slipping beyond the edge. It doesn't all have to be done at once but if you're not already on the street you can do it.
My rights don't end where your fear begins.
(Score: 0) by Anonymous Coward on Tuesday October 22 2019, @02:59PM (5 children)
Correct. Most people can put away *something*. Also, most people will encounter successive contingencies that will cyclically erase that something.
QED: The population distribution.
(Score: 2) by The Mighty Buzzard on Tuesday October 22 2019, @04:31PM (4 children)
Incorrect and correct at the same time. Most people can put away something. And most people do not. Most people in fact decide to live beyond their means and run up debt that they then have to pay interest or other penalties on rather than save.
Every single time you buy a cheeseburger or a coke instead of eating beans and rice or drinking water, you have declared that you'd prefer immediate comfort to financial security. If you own a television but have no savings you have done the same. Anything and everything beyond what is absolutely necessary to survive, maintain employment, and maintain your ability to work is a luxury and should be temporarily put aside until you can ensure you have enough squirreled away to cover at least a few months of unemployment or a similarly priced emergency.
Now don't go thinking I blame every poor person for not doing so. I don't. Most of them didn't have parents who were capable of teaching them how to wisely manage their finances. This is not hard to fix though. The ones who know they should save money and still blow it on luxuries can starve in the street for all I care though. They're not saying the phrase Azuma loves so dearly (Fuck you, got mine.), they're instead effectively saying "Fuck you, taking yours". Which is much, much worse.
My rights don't end where your fear begins.
(Score: 0) by Anonymous Coward on Tuesday October 22 2019, @04:51PM (1 child)
But you do, and you did.
(Score: 2) by The Mighty Buzzard on Tuesday October 22 2019, @09:28PM
Incorrect again. You simply can't understand English very well.
My rights don't end where your fear begins.
(Score: 0) by Anonymous Coward on Wednesday October 23 2019, @02:20AM (1 child)
What is property?
(Score: 2) by The Mighty Buzzard on Wednesday October 23 2019, @01:26PM
Stuff.
My rights don't end where your fear begins.
(Score: 3, Insightful) by Reziac on Wednesday October 23 2019, @03:20AM
Easy way to save something, even when you're broke -- every time you come in the door, put all the change from your pockets into your personal tip jar. If you're ambitious, add the $1 and $5 bills. Adds up, and at that level the brain counts it as 'already spent' so it's painless.
And there is no Alkibiades to come back and save us from ourselves.