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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: -1, Flamebait) by Anonymous Coward on Tuesday October 22 2019, @02:22PM (7 children)
Perhaps you should have used some engineering skills in your family, such as safe load limits.
Perhaps the state shouldn't be funding otherwise high earners who over reproduce. But I guess the nation will need more soldiers.
(Score: 2, Interesting) by Anonymous Coward on Tuesday October 22 2019, @04:06PM (6 children)
Witty. Actually, I thought it was a better zing when my co-workers at my old office offered to sign me up for the "basic rubbers" course when I got hired.
Incidentally, the predictability of a comment like yours is why I posted AC; "large family" isn't a protected social class, and it's funny how it's the same people preaching tolerance of differences who are first to take that stab.
You might want to talk to your congress critters about that: I didn't write the tax code, and I'm not about to turn Uncle Sam down when he offers to hand me back some of my own money.
It does, although you say that like it's a bad thing. In any case, soldiering isn't for everybody and I doubt my kids are heading that way. With two college-educated parents that know how to budget they're on track for graduating college w/o student loans, which is more than most Millennials can say for themselves.
(Score: 0) by Anonymous Coward on Tuesday October 22 2019, @07:08PM (3 children)
I don't care whether or not it is a protected class. I'm not your boss, nor your priest, and as such not limited in criticizing your poor choices.
(Score: 0) by Anonymous Coward on Tuesday October 22 2019, @07:23PM (2 children)
Your irrational prejudice is showing. Also, pointing out that your speech is not literally illegal is pretty shallow justification for rudeness.
Thank you for demonstrating the point that social stigma is the only check on some people's treatment of people different from them.
(Score: 0) by Anonymous Coward on Wednesday October 23 2019, @08:35AM (1 child)
It's not wrong to point out that having children you can't comfortably afford is a bad idea. It's just another type of bad financial decision.
(Score: 0) by Anonymous Coward on Wednesday October 23 2019, @01:39PM
What makes you think I'm not living comfortably? Didn't I just say that I weathered extended unemployment with no change to quality of life?
Perhaps your idea of comfort and mine are different, and that's a value judgement on both of our parts. Assuming, however, that I couldn't possibly be properly caring for my children because I have more than you consider normal is insulting; especially so, given the rest of the context.
(Score: 1, Interesting) by Anonymous Coward on Wednesday October 23 2019, @08:42AM (1 child)
You should talk to your congress critters about that too, if you have any principles. Government discrimination based on the number of children someone has is not acceptable.
No, plenty of conservative people who aren't dipshits about finances would also criticize you for that poor financial decision.
Also, having kids you can't comfortably afford is a lot different from being black, gay, a woman, etc., none of which you can control. Having children is almost always a choice, so this is nothing but a false equivalence on your part.
(Score: 0) by Anonymous Coward on Wednesday October 23 2019, @03:10PM
Well, we'd better roll back the EIC and child tax credits while we're at it, too. Supporting the children of the nation fits my principles just fine, and I pay more than enough in income tax to cover the Government benefits I've enjoyed. I'm not sure why you think giving benefits to each child who qualifies is discrimination, what alternative would you propose?
That's not been my experience. Most of the conservatives I talk to either a) are down with big families and understand how economies of scale apply to them, and/or b) figure it's none of their business how I choose to spend my money. It's usually the Liberals who decide it's OK to make unfounded accusations about my financial competence based on insufficient information. I'll take my own anecdotal evidence over your unfounded speculation on this.
Abortion is a choice, too; is that one you'd propose making for me? I have the right to make my own family planning choices, and to analyse for myself what I can afford and what I can't. I do find it odd that if I'd chosen a garage full of exotic cars instead of a house full of children that I'd get many fewer people making unfounded accusations of financial incompetence.
At the risk of setting up a strawman, I'll cut off the rest of the discussion that usually follows:
Nope, I pay lots of federal and local taxes; what I get back is not coming out of your pocket as much as simply going back into mine. And even if I weren't, it is odd hearing "taxation is theft!" from anyone other than radical Libertarians/Anarchists. It's funny how people who are usually down with tax & spend government are suddenly offended when people actually take advantage of the benefits that government set up.
You can't possibly know that. You are making assumptions about my situation on far too little information. And, no, I'm not going to lay bare my financial ledgers and details about my children's lives for the entire internet just because you don't know me. I will say that the people who see my family up close have no concerns.
Without delving into details that are none of anyone's business but my own family, I'll share that the number and timing of my children's births was planned and deliberate, and not the result of any unwillingness or inability to use birth control.
And I'll stop there. I'm constantly amazed at how free people feel to interrogate the details of my family life that are literally the most intimate (sex, finance, medical) as soon as they find out I have a large family. It's horribly inappropriate, and the level of smug self-righteousness expressed in the process makes it clear that the interrogators feel no remorse about it. Well, our doctors and financial adviser know the facts; random internet armchair quarterbacks can keep their unfounded judgments to themselves.