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Data Shows 28 Percent Of People Couldn’t Withstand A Single Financial Emergency

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It’s no secret that the savings rate of the average person is pretty low right now. Before the financial crisis, American citizens were, on average, borrowing money to finance their lavish lifestyles. Today, they are saving a small amount, but most of that saving is concentrated in the hands of the wealthy. The average person is hardly saving anything at all. In fact, the vast majority of falling further into debt.

According to the latest statistics from Bankrate, only around 28 percent of people could afford to pay for an emergency out of pocket. Around half of people have no savings at all, and couldn’t do anything if they fell on hard times.

You’re Not Immune To Disasters

One of the foibles of human psychology is the idea that bad things only happen to other people: they don’t happen to us. Many people spend their entire lives in denial about their relationships, their health, and their future. And the same goes for their finances. They imagine that just because they’ve never been seriously injured or been made redundant from their job that it’s not something that will happen to them. Unfortunately, this kind of thinking isn’t just optimistic, it’s unrealistic. You never know when you might get hit by the proverbial bus.

Even people who think that they are fit as a fiddle and running up and down mountains can suddenly fall ill or get injured at work with no warning. It’s at times like these when medical bills mount, and they have to take time off work – often time that they can’t afford.

Other disasters can befall you too. What about if your HVAC suddenly stops working in the middle of summer? What if your car gets into a wreck and you’ve got a large excess? What if your home becomes infested with termites and it’s going to cost a fortune to repair the damage? Could you cope with these expenses?

The Frequency Of Financial Shocks

We are supposedly in the recovery phase of the economic cycle right now. Businesses are growing, jobs are returning, and the stock market is booming. But that doesn’t mean that families are immune to disaster. According to Pew, the international polling and data agency, more than 60 percent of families faced some kind of financial calamity in the last year, proving that having to pay out large sums of money isn’t a rarity – it’s relatively normal. And remember, those statistics are referring to just one financial event. You could experience two, three or even more in any given year.

How To Fight Back

Living under the specter of a financial emergency is never a pleasant experience. But there are ways you can fight back. Suppose you have been injured and can’t work. This is when things get real, and you need a personal injury attorney. Often, you’re able to claim back a significant chunk of your lost income as well as claim damages against an employer or somebody who has acted negligently.

For emergencies where you can’t get paid compensation, what else can you do? According to the Motley Fool, the best strategy is to build up eno0ugh cash to last you between 3 and 6 months of regular expenses. How exactly? Their advice isn’t just to keep money under your bed. Instead, they recommend that people put their money into money market funds that they can’t access easily. Not only will they grow in value as the stock market goes up, but they also help to reduce the temptation to spend. If money is tied up in various assets, it makes it harder to get hold of if you just want to spend it on a whim.

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How you approach saving more money really depends on your personality type. If you have more of an addictive personality, it’s probably a good idea to go cold-turkey and just pour all your savings into assets, like funds, stocks, and share. If, however, you don’t have those addictive personality traits, you might be able to change your habits slowly over time. Start off by siphoning off a small chunk of your paycheck every month to put into your emergency fund. Over time, slowly increase the amount of money you squirrel away. It might be painful at the time, but you’d be surprised just how much money you can save by saving money consistently.

To make your money grow faster, be sure to put it into instruments that gain good returns at relatively low risks. Savings accounts are a great option, as they allow you to access your money if you encounter an emergency.