If you live on Social Security, the advice to stash away a year or two of expenses can feel not just impossible but insulting.
Here is the good news: that advice is meant for people with big investment portfolios. For regular Social Security recipients, an emergency fund can be far smaller and still do its job.
That job is simple: keep a surprise from becoming a crisis. A car repair, a dental bill, a broken water heater, or a sick pet can wreck a tight monthly budget and push you toward a credit card or a payday loan. A small cushion of cash heads that off.
How much? A realistic first goal is $500 to $1,000, which covers most everyday emergencies. Research from the Consumer Financial Protection Bureau suggests that even about one month’s worth of expenses is enough to sharply lower the risk of hardship for households on a tight income. You do not need to get there overnight.
The most important step is simply starting. Financial educators like to say that any emergency fund is better than none, and studies back them up: people who begin saving, even a little, are far less likely to be sunk by an emergency. Set aside $10 or $20 when you can, keep it in a separate savings account so it is not too easy to spend, and let a tax refund or a birthday check go straight in. A few hundred dollars, built slowly, is worth more than a perfect plan you never begin.
Rick Good spent ten years in the newspaper business, including with The News & Observer (Raleigh, NC) and The Greenville News (Greenville, SC). He co-wrote, with Melinda Coleman, Rutledge to Riley: Governors of South Carolina, 1776–Present (Published by The Greenville News), and is the author of Mind Games Trivia #1 (Amazon). He has recently spent 15 years creating original trivia content through Sounds Good Mobile Entertainment and continues that with his new company, SGME Software. He edits The Smart Reader’s money, real estate, and business coverage.
