This path helps you build a simple, flexible strategy to manage pop-up expenses effectively, on the fly, so you can get back on track as quickly as possible.
First, identify your priorities and your most likely emergencies. Then start working on your custom action plan.
Guiding Principle for the Unexpected Costs Path
Smart preparedness – Blend strategy and preparedness to protect your finances.
How the Path Works
Learn it.
- Learn how to prepare for emergencies and reduce costs ahead of time.
- Pick the emergency fund saving strategy that fits your situation and goals.
- Discover how to pay for large and small expenses on the fly.
Plan it.
- Reevaluate your emergency funds and plan to build financial capacity.
- Investigate ways to prevent and lower the cost of your most likely emergencies.
- Review your insurance policy guidelines and how to process a claim.
Do it!
- Compare financial tools that make it easier to handle unexpected events.
- Position your finances to perform in an emergency.
- Reevaluate and rebuild your finances after each event.
TIP: Emergency savings are foundational, so it’s important to take this path early, especially if you need to build or reconsider your emergency fund.
Topics Covered
The Unexpected Costs Path focuses on building nimble finances that can absorb the shock of pop-up expenses and help you get back on track quickly.
Our interactive tools and articles help you determine whether a conservative or strategic saving approach fits your situation best. Then you can build an action plan to help you:
- Plan for smaller surprise costs
- Navigate larger hits to your finances
- Protect your assets, credit, and rebuild your financial capacity afterward
The most common topics are explored:
- How much emergency fund do I need?
- Should I still save for emergencies if I’m trying to get out of debt?
- Can I reduce any unexpected bills once they happen?
- Should I use my credit card to pay for an emergency?
- What if I don’t have any emergency savings?
- How do I prepare for a tornado, hurricane, fire, or other natural disaster?
Frequently Asked Questions
When should I use my emergency fund?
Don’t be afraid to use emergency savings when you need to, but it helps to have guidelines in place before unplanned expenses happen. Develop a strategy around how you pay for bills that pop up unexpectedly and a way to rebuild your finances afterward, so you’re always prepared.
Why do I need an emergency fund?
It’s important to set up an emergency fund to help absorb unexpected costs – it’s like a safety net for your finances. Without it, you might end up working off high-interest credit card debt and derail your other financial goals.
Should I save more for emergencies because of inflation?
Yes. When costs start to rise with inflation, it’s time to rethink how much you save for emergencies too. It’s a good idea to survey costs in your area to see how prices have changed and factor that into your planning.
How many Americans can pay a $400 emergency immediately?
Based on a recent Empower study[1][2], 63% of Americans can pay a $400 emergency immediately while “Nearly 2 in 5 (37%) Americans say they couldn’t afford an emergency expense over $400.”
Even though 62% consider emergency savings a priority, almost 57% said price increases and inflation kept them from adding to their emergency savings in 2024. In addition, 21% reported having no emergency savings at all.
Sources:
- Over 1 in 5 Americans have no emergency savings
The Currency Editors, Empower
Accessed: 12-05-24 - 37% of Americans can't afford an emergency expense over $400, according to Empower research
PR Newswire – Media contacts: Rebecca Rickert & Katelyn Kwiatkowski
07-02-24 | Accessed: 12-05-24
