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It would appear that 1 in 3 Americans are on the verge of financial ruin. "37% of Americans have credit card debt that equals or exceeds their emergency savings. "These numbers mean that three out of every eight Americans are teetering on the edge of financial disaster. Not only do most of them not have enough savings, they’ve all used up some portion of their available credit — they are running out of options."”
I don’t know about you, but it’s limited what how much cash I am willing to leave in a no-interest bearing checking account. A high-yield savings account is nice, but that too falls short of the rate of inflation. Investing is where the higher rate are.
The good news is that I generally have no credit card debt, as a small balance is left on one card. I define debt to start at the statement date, not the due date. There’s always one favorable convenience check lying around for emergencies.
Of course emergencies shouldn’t really be considered unexpected. It’s a statistical fact that over the years things happen just as surely as traffic builds up in the same bottleneck locations every day.
@Anonymous-own-fico wrote:It would appear that 1 in 3 Americans are on the verge of financial ruin. "37% of Americans have credit card debt that equals or exceeds their emergency savings. "These numbers mean that three out of every eight Americans are teetering on the edge of financial disaster. Not only do most of them not have enough savings, they’ve all used up some portion of their available credit — they are running out of options."”
I don’t know about you, but it’s limited what how much cash I am willing to leave in a no-interest bearing checking account. A high-yield savings account is nice, but that too falls short of the rate of inflation. Investing is where the higher rate are.
The good news is that I generally have no credit card debt, as a small balance is left on one card. I define debt to start at the statement date, not the due date. There’s always one favorable convenience check lying around for emergencies.
Of course emergencies shouldn’t really be considered unexpected. It’s a statistical fact that over the years things happen just as surely as traffic builds up in the same bottleneck locations every day.
Much like Suzy Orman, I am a huge supporter of a healthy emergency fund above all else.
How are people defining their emergency funds in this case? Not certain I read much into this.
I can liquidate the majority of my stock holdings on any given market day and have cashiers check same day into my local checking account; I don't consider that to be emergency savings but it's there if the fecal matter hit the air circulation device.
If the article was their assets are equivalent to their credit card debt... that's a diffent story in my book; not surprising with negative savings rates for a while and many people are shopping with both hands.
Though I wouldn't be surprised at all if XX% of Americans really are teetering on the brink of financial ruin, I'm not sure the metric in that article (savings vs cc debt) proves the case.
I definitely believe in having a healthy emergency fund, but I'm tired of "experts" chiding me to save money when interest rates even on savings accounts are so low that the average guy is actually losing money every year his cash sits there.
@Jayb5635 wrote:
I need to build a bigger emergency fund, but I wonder if there is more value in say, moving money into a Roth IRA, since at least there you're investing. I'm currently trying to max my contribution for 2014
Not sure I'd consider a Roth IRA as emercency fund since if you need it, there's a penalty to take money out.
@mitchblue wrote:
@Jayb5635 wrote:
I need to build a bigger emergency fund, but I wonder if there is more value in say, moving money into a Roth IRA, since at least there you're investing. I'm currently trying to max my contribution for 2014Not sure I'd consider a Roth IRA as emercency fund since if you need it, there's a penalty to take money out.
Contributions can be withdrawn penalty-free from a Roth IRA; it's only earnings which are penalized if withdrawn early.
Learn something new everyday. Thanks.
@Jayb5635 wrote:
I need to build a bigger emergency fund, but I wonder if there is more value in say, moving money into a Roth IRA, since at least there you're investing. I'm currently trying to max my contribution for 2014
You can invest money outside a Roth as well. Besides, Roth contributions are limited to only $5000 a year.
@Anonymous-own-fico wrote:
I don’t know about you, but it’s limited what how much cash I am willing to leave in a no-interest bearing checking account. A high-yield savings account is nice, but that too falls short of the rate of inflation. Investing is where the higher rate are.
Your need for emergency cash increases as you get older, since you naturally will build a family, have greater living expenses, and probably buy a house. When you're young, say fresh out of college, a couple grand is plenty. If you own a house and are paying 1.5k a month for the mortgage, have a spouse and 2 kids, etc., you probably need 20k in emergency fund in event of a job loss, property damage, or large medical bills.