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I am not surprised that more than 80% of women recently surveyed by Fidelity who had no emergency savings said they live with financial stress. But here’s what made me smile: Women who have managed to save up enough money to cover three months of living expenses were far less likely to be carrying around high levels of stress. Just one in four women with a three-month emergency savings account said they are feeling a high level of stress.
Now you know that I want you to have far more than three months of living costs set aside. One year is my sweet spot advice for being prepared for major financial setbacks. But if you have no emergency savings, I think making three months of living costs your savings goal is beyond fantastic. It will be such a great step forward in financial security, and now we know there’s a pretty good chance it may also help you manage your financial stress.
If you think this is just not something you can afford to work on, I am going to ask you for a moment of self-care and kindness. Can you turn around your thinking and appreciate how you can’t afford to not make emergency savings a priority? It is not just about the financial security it will bring, but the priceless peace of mind you deserve.
And don’t worry about my bigger long-term goal of having one year of expenses set aside in a safe savings account. That’s not your goal for now. Let’s walk, before we try to run.
The first step in committing to building up a 3-month savings account is to have a clear picture of your monthly essential costs. No guessing. Or ballparking. Please find some quiet time to tally up not just the rent/mortgage, but the food and utilities. And calculate the monthly cost of all your essential insurance premiums: health, home/renters, car.
Then multiply that by 3. That’s your savings goal.
Next, divide that sum by 12. For instance, if three months of living costs is $7,500, you would need to save $625 a month to have your 3-month emergency savings within one year. If that’s too steep a commitment, divide by 18 to see what you would need to save to meet your goal within a year and a half. Still too steep? No worries! Divided by 24; do you think you could save that sum to reach your goal within two years? For our $7,500 example, that would be $310.50 a month. Which is about $10 a day. I bet that’s not out of the question if you make it a priority, right?
(I get that some of you may have much higher living expenses. See how the math works out. If you can’t see your way to having three months saved within a year or two, it’s up to you to diagnose why. If it’s because of unanticipated and unavoidable costs—a debilitating illness, caregiving for a loved one, etc.—I understand. But if it’s because you have chosen a lifestyle you can’t afford, it’s time for a personal reckoning if you care about long-term financial security.)
Once you decide how much you are going to save, I want you to commit to an automatic deposit into a federally insured bank or credit union savings account. The monthly (or biweekly, or weekly) transfer should be absolutely free to move it from a current account into your new savings account. Just make sure you won’t owe any service fees on a new account which will start with a low balance. (And if you haven’t yet checked out the Ultimate Opportunity Savings Account from Alliant Credit Union (for new Alliant members), what are you waiting for?)
The final step is to log in to your new savings account and take a look once a month. And then give yourself credit for what you have already achieved: every month your account grows, it builds financial security. And that’s going to help make life less stressful.
Alliant, an award-winning digital credit union, has partnered with Suze Orman to offer a high-rate savings account and bonus for new members. Jumpstart you or your family’s emergency fund with the Ultimate Opportunity today!
Suze Orman is the author of 10 consecutive New York Times bestsellers, a two-time Emmy award winner, and your go-to for honest answers on everything finance. She is the most recognized personal finance expert in America today and host of the Women & Money (and Everyone Smart Enough to Listen) podcast. Suze is excited to be a contributor for Money Mentor.
Suze and Alliant teamed up to help Alliant members make the most of their life by teaching them to make the most of their money. New Alliant members are also eligible for The Ultimate Opportunity Savings Account.
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