Savings Stability: Establishing a Financial Baseline

Monday, August 12, 2019
establishing a financial baseline for emergency savings

How much money do you need to survive financially if something happens? Do you know? If you don’t, you’re not alone. Studies have regularly shown that 25% of Americans have no emergency fund at all. Roughly another 25% may have saved enough to sustain them for a month or two, less than 25% have saved three to five months’ worth of funds, and only an elite few has six months’ worth of savings or more. 

Learning how to save—and how much you really need to save—is key to financial stability and a money management essential, especially for young adults just getting their footing in a shaky economy.

What Is an Emergency Financial Fund?

Living paycheck to paycheck can be a tempting lifestyle. Pay the mandatory bills. Make the minimum payments. Spend what’s left. As long as the cash continues to flow, it all works out. But what do you do when an unexpected life event disrupts that balance?

One illness, injury, accident, relocation, mistake or even unplanned family addition can all too easily impact our ability to earn, dramatically increase the amount of money we need on hand or, in the worst cases, do both. If you have an emergency fund, you have much better chances of bouncing back from financial setbacks. If you want that kind of security, the best thing you can do is learn how to save for it.

How Much Money Do You Need to Save for an Emergency Financial Fund

Life events come with a wide variety of price tags, so there’s no way of knowing which end of the financial spectrum yours will fit. Your emergency fund may not be able to cover every expense associated with a life event. In fact, other entities may come into play. However, if you’ve funded your emergency savings properly, you’ll be financially secure enough to pay your basic living expenses while you recover, find a new job or wait for the insurance to deliver the benefits owed. 

To know how much money you need in your emergency fund, establish a financial baseline that represents one month of living expenses. You’ll need to include regular monthly payments like the mortgage or rent, car payment, student loans, utility bills and communication services, for example. This should also include estimations for necessities such as food and gas. You'll also need to account for quarterly, semiannual and annual expenses like life or health insurance, professional licenses and other financial obligations that you might have to pay during the interim to avoid a lapse in coverage or membership.

Example Estimation:

Rent/Mortgage: $900

Car Payment: $300

Utility Bill: $70 (average)

Phone Bill: $100

Car Insurance: $110

Food: $250

Gas: $60

TOTAL: $1,790 x 3 months = $5,370

For a grand total, emergency fund guidelines recommend that you save enough money to cover your living expenses for at least three months — at least one quarter of a year. Before you panic, realize that while it may sound hard, it's doable and smart. Ideally, with some commitment and a little planning, you might even be able to join the one in four Americans with at least six months' worth of expenses securely reserved in savings.

Supercharge Your Saving

Starting an emergency financial fund is as easy as opening a savings account. With La Capitol Federal Credit Union, you can open one with as little as $5 and earn dividends with balances as low as $100. Add a little each month through scheduled deposits, and watch your nest egg grow, knowing that if something happens, you’ll be okay. 

It may seem like a small decision, but a well-funded emergency savings account can be the difference between losing everything and pulling through a tight spot. Remember, it’s never too late to start saving. An emergency fund is an essential cushion that gives you both the financial security and freedom you need to be able to achieve your other long-term financial goals.



La Cap Savings (Share) Accounts are variable rate accounts. La Cap may change the dividend rate for your account as determined by the credit union Board of Directors. Dividends earned are posted and compounded monthly. Each day your account balance exceeds $100.00, you earn dividends on the entire balance. Applicable fees and conditions could reduce the earnings on your account.
Minimum balance required to avoid monthly service fee: $100.00. The monthly service fee on Regular Savings accounts is waived if there is an active loan account or certificate account.