Are You Prepared for a Money Emergency?

Based on a new survey, the answer is probably no. Here's how to get ready for that rainy day

by Kerry Hannon • Next Avenue
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Photograph: Shutterstock.com

During last week’s 90-degree days in Washington, D.C., the air-conditioning unit in my home went kaput.

The fan merrily blew hot air, but not a breath of cool slipped through the vents. As the indoor thermostat climbed and my dog began to look miserable, the solution was simple: Call someone to repair the air conditioner, pronto.

The bad news that followed was that the nearly 20-year-old unit couldn’t be fixed and the cost to install a new one would be a sizzling $6,000 or so.

Unexpected? Yes. Unpleasant? You bet. Unprepared? No.

How My Emergency Savings Saved Me
I have an emergency fund in a money market savings account for precisely this kind of out of-the-blue problem and I keep enough cash in it to cover more than a year of daily living expenses. And by all accounts my new AC unit should last at least 15 years.

(MORE: Women Need to Get Serious About Emergency Savings)

For a work-at-home gal like me on a hot, sticky summer day, I was mighty grateful for my rainy day fund.
 
But many women around my age – in their 40s, 50s and 60s – aren’t as ready for a money emergency.
 
Puny Rainy Day Funds
The recent Women’s Financial Survey from the Credit Union National Association revealed that roughly 59 percent of women age 45 to 60 don’t have an emergency fund that would cover their expenses for even six months. And only a hair more than a third (36 percent) of women ages 44 to 53 do.

Most men aren’t braced for emergencies either.

Earlier this summer, a Bankrate.com survey of 1,004 American adults found that fewer than 1 in 4 (24 percent) have enough savings in a checking, savings or money market account to cover at least six months of expenses. Half have less than three months' saved up; 27 percent have zilch in reserve. Those numbers have barely budged in the past three years, incidentally, even though the economy has improved.
 
How Much Is Enough?
Unplanned expenses can be shocking and squirreling away money for them can be tough. But how much is enough to set aside? The equivalent of three months’ daily living expenses? Six months? A year? More? Read the rest of the article on Next Avenue.

Next: The Truth About Career Coaches

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Photo courtesy of Palto/Shutterstock.com

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