I read this in Money Magazine and was dumbfounded.
“In a recent survey for the National Endowment for Financial Education, 42% of those under 40 reported getting financial help from their parents as adults.”
I realize there are circumstances under which you would need to accept help in an emergency. However, that 42% of us have had such emergencies in our adult life means one thing.
You’re not saving enough. You’re not INDEPENDENT from your parents!
So first things first… you need to start saving up. And this is NOT for a rainy day. Rainy day funds are from the jug. This is for your emergency fund and to get you into the habit of being saver. Financial responsibility isn’t an inherent talent. You learn it. You have to study it and hone your ability to know what is a want vs a need. Now you’re thinking “I’m not interested in being a financial genius.” Believe me, neither am I. What I AM interested in is feeling the confidence that unless something cataclysmic happens, I will not need to seek financial help from my parents. You know why that is so important?? Because I feel the entire weight of responsibility to save for my future. There is no fail-safe for me. Even though our parents are well-intentioned, by rescuing you every time you need help paying your car payment, they are giving you a “parents-as-the-backup mentality”. So let’s fix that. Because mom & dad aren’t always going to be around and let’s be honest, they deserve to enjoy their savings in their own retirement.
Okay so how much to you need to save?
The rule of thumb that I like to start with is 3 months of your household expenses. If you lost your job today, it would give you 3 months to find another one. Some people say a flat amount like $10,000. If that is easier for you, then by all means do that.
Once you get your 3 months of expenses, go for 6 months or $20,000. If you have that, then go for a year or $50,000. The idea is get into the habit of saving. You can choose to put it in whatever account you like, money market, high yield savings accounts but just make sure you can get access to it within a few weeks time without penalty. (aka: Liquid)
If you already have an emergency fund then take a look at your retirement savings. According to Money Magazine, you should be saving at least 12% – 15% of your yearly income for retirement. Many companies have a 401k contribution match program. This is free money. Make sure you’re taking advantage of any opportunity to save tax free and get FREE money.
“What if I live paycheck to paycheck and NEED all my money. I can’t afford to save.”
Believe me there is always a way to pare back your expenses. If this is a problem for you then look for a future post about how to cut the fat from your monthly budget. For now start with putting $5 a day in a jar. Every day. Voila! You just saved $150 in a month. Easy peasy. The key is making it a habit and committing to it. It doesn’t matter if it takes you a few years to save up your emergency fund. Just as long as you save regularly. It’s hard at first but then it gets to be so easy.
So get started. Today.
Leave a comment if you’ve already saved your emergency fund so we can congratulate you. If you haven’t, leave a comment committing to starting today. INDEPENDENCE people. It feels great.