Recently, I ventured through the Coachella Valley, an expansive desert region located about 120 miles east of Los Angeles. While some visit for leisure activities like golf or retirement, my purpose was strictly business. Unfortunately, the relentless heat and dryness left me eager to depart almost as soon as I arrived.
Throughout our brief stay, we focused on serving our client with dedication, professionalism, and transparency. Once our tasks were complete, we promptly headed back west at the first opportunity.
This trip was all about generating income, but the more pressing goal was to save a portion of what we earned. Indeed, while earning money can often seem straightforward, the art of saving presents its own set of challenges—especially for those of us with young children who seem to wear through shoes at lightning speed. As much as we appreciate their spirited energy, unexpected expenses can quickly erode what could be monthly savings.
However, the pursuit of saving money is an endeavor well worth the effort—not only to build an emergency fund for when life throws us a curveball but also as the cornerstone for accumulating true wealth.
The Importance of Emergency Savings
To accumulate wealth, one must first prioritize saving money. Unfortunately, a significant number of Americans are not saving anything at all. Many find that their biweekly paychecks vanish before the next one arrives.
According to a survey conducted by Bankrate.com, nearly 29 percent of American adults—approximately 70 million people—lack any emergency savings, marking the highest percentage recorded since the survey began five years ago. Alarmingly, only 22 percent have set aside at least six months of savings, the recommended safety net by financial advisors, which is the lowest level recorded during this timeframe.
These revelations reflect a troubling reality regarding Americans’ preparedness for sudden financial crises. A separate survey by NeighborWorks America revealed that about one third of Americans (34 percent) have no emergency savings whatsoever.
Greg McBride, Chief Financial Analyst for Bankrate.com, suggests that stagnating household incomes have led to tighter budgets. He observes that many individuals neglect to prioritize their savings, often waiting until the end of the month to save what little remains, which frequently amounts to nothing at all.
The consequences of insufficient savings can be dire when unexpected expenses arise. Individuals may feel compelled to rely on high-interest credit cards or personal loans—and in the worst cases, face the prospect of bankruptcy. A 2014 American Express survey revealed that half of Americans experienced an unforeseen expense in the preceding year, with 44 percent relating to healthcare and 46 percent concerning vehicle issues—both of which are often unavoidable expenses.
Building a Foundation for Wealth
The key takeaway is to start building your emergency fund right away. If you already have one, make it a habit to contribute consistently. Like any other skill, the practice of saving requires patience, discipline, and commitment; once you begin, you’ll find it easier to maintain the momentum.
Life is unpredictable. Although the economy has shown signs of slow recovery over the past six years, it’s likely that another downturn could be on the horizon. What happens then?
A downturn can render debts and investments based on anticipated growth unmanageable. If rising interest rates accompany this decline, the situation can quickly spiral out of control—leading to surges in unemployment and bankruptcies.
No one can predict the immediate future with certainty. We may see a strengthening GDP or witness the economy slip into another recession.
The best time to prepare for challenges is before they arise. There’s no better moment to bolster your cash reserves than now—whether it’s in your bank account or tucked away for safekeeping. You’ll rest easier when you know you have a financial cushion, and this preparedness lays the groundwork for building true wealth by enabling you to seize opportunities when others may falter.
Sincerely,
MN Gordon
for Economic Prism
