Still haven't reached the goals you set for saving money this year? Here are three tips to help you reach those goals despite the coronavirus pandemic:
1. Saving Money Is Still Possible for Many People Right Now
The savings rate has jumped up since the beginning of the pandemic, as many people aren’t able to spend as much. But before we lose the lessons of the pandemic, it’s critical to build up your emergency savings fund and develop the habits that will keep you from spending unconsciously in the future.
Start by setting spending rules, such as waiting seven days before purchasing any item over a certain dollar amount that isn’t absolutely essential. You will be surprised by how often your urge to purchase something will be quelled if you simply wait some period of time to consider whether the item is truly a need or a want.
2. How Much Should You Save for Emergencies?
A recent survey shows that 67 percent of Americans regret not having enough savings before the pandemic hit, 47 percent have already run out of their emergency savings and 82 percent could not cover a surprise $500 expense.
The main reason for this is that the conventional wisdom about how big your emergency savings fund should be is severely flawed. Virtually all experts give the same advice: have a rainy day fund equal to three to six months of your household expenses. The last recession and financial crisis left tens of millions of people out of work for one year or even two. And banks weren’t lending.
Realistically it could take 18 months to two years or more for things to get back to “normal“ for many financially. This is why you need to have safe and liquid savings equal to two years of your expenses. Start wherever you can, and increase your savings by 1 percent or 2 percent whenever possible, and you won’t feel the pinch.
3. What's the Best Place to Stash Your Emergency Fund?
Consider an overlooked financial vehicle that has stood the test of time and has historically significantly beaten the growth of savings and money market accounts. It gives you penalty-free access to your money whenever you want and for whatever you want, with no restrictions and no questions asked. That vehicle is high cash value, low commission, dividend-paying whole life insurance.
It can double as a retirement plan alternative that gives you guaranteed, predictable growth every year, tax-free withdrawals under current tax law, and enables you to know the guaranteed minimum value of your retirement savings on the day you plan to tap into them at any point along the way.
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