Can your bank account handle a financial emergency?
Without savings, surprise expenses — like car repairs, medical bills or job loss — can push you into debt fast. That’s why personal finance expert and bestselling author Suze Orman says your #1 money move should be building an emergency fund now.
“The one thing every single person needs is an emergency savings account. I’ve been saying that for over 40 years now, and it’s been getting to be more and more of a problem,” she said.
Orman recommends saving enough to cover 3-6 months of living expenses in a separate, easily accessible account — no matter what your other money goals are.
Here are three key reasons she says it’s absolutely essential.
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It Provides Crucial Financial Protection
With today’s rocky economy, having a cash cushion to cover costs is more essential than ever. As Orman explained, “We’re living in a very precarious time right now.”
Instead of racking up hefty credit card bills with high interest rates, you can put your emergency fund toward unexpected expenses. An emergency fund serves as indispensable financial protection when the unexpected occurs. Having three to six months’ worth of living expenses set aside can keep you afloat during periods of income loss, accidents, illnesses or other disruptions.
Orman warns that people without adequate emergency savings funds “have got to be scared to death.”
It Buys You Time During a Crisis
Laurie Itkin, financial advisor at The Options Lady, agrees that emergency savings have become urgently important, given steep inflation and waves of layoffs. Those without cash reserves may have no choice but to put regular expenses on high-interest credit cards if paychecks suddenly cease, and carrying high-rate debt destroys finances.
Even small, regular monthly contributions to a high-yield savings account or money market account at your preferred bank or credit union can build emergency funds over time. As Orman advised, “All you need is $5, $10 or $20 a week.”
These savings can provide vital breathing room to handle costs if you face a crisis like job loss or disability. It may seem counterintuitive to try and predict the future but planning for the unexpected helps alleviate any financial shocks you may run into down the road.
It Prepares You for the Worst
For regions prone to natural disasters like hurricanes or floods, Joe DeBello, a financial advisor and the vice president at CAPTRUST, recommended designating special savings just for weather emergencies.
Per DeBello, calculate your full living costs including insurance deductibles, food, shelter, clothing, gas and other essentials. Determine a monthly savings goal that’s feasible for you to set aside in a dedicated emergency disaster account.
Even modest savings here can prevent desperate reliance on retirement withdrawals or high-interest debt.
Why Orman Prioritizes Savings
Pretty much all financial experts agree with Orman that establishing emergency savings must be a top priority. What you put in your savings now for a rainy day turns into an umbrella later. During economic volatility, it can provide you with not only a financial cushion but also an FDIC-insured safety blanket.
Orman stressed, “I don’t care if you have credit card debt, I don’t care if you have student loan debt — I don’t care what debt you have. You have to have that emergency [savings] account.”
Building even a small starter emergency fund creates stability, options and peace of mind. Take Orman’s over-40-years-strong advice to heart: Emergency savings funds are a non-negotiable necessity in every financial plan.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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