57% of Americans Can't Cover A $1,000 Emergency With Savings—Here's How You Can Prepare For Unexpected Costs And Build An Emergency Fund

According to the 2023 Bankrate survey, just 43% of Americans would be able to cover a $1,000 emergency expense with their savings. Even fewer would be able to cover their full living expenses for at least one month if they unexpectedly lost their primary source of income.

For many, inflation and unemployment are the key factors preventing them from saving as much as they would like. But having an emergency fund is an important safety net to ensure that unexpected car repairs, medical emergencies, or job losses don’t completely derail your financial future. Here’s how to figure out how much you should have in your emergency fund and some other tips for protecting yourself and your family from financial hardship.

Why Should You Have An Emergency Fund?

No matter how much you earn, every household is bound to face an unexpected but unavoidable expense now and then. An emergency fund acts as a safety net so that when those emergencies happen, you can pay for them without going into debt or being forced to make tough financial decisions like tapping into your 401k or downsizing your lifestyle. 

Typically, the costs an emergency fund is supposed to cover include:

• Unemployment. Even if you have unemployment insurance, it doesn’t replace your full income. An emergency fund can help cover the gap while you look for another job.
• Urgent medical procedures
• Emergency home repairs, like a new roof or foundation repairs that you can’t afford to ignore.
• Unexpected car repairs
• Sudden death or disability

How Much Should You Save In Your Emergency Fund?

Common wisdom states that each household should have somewhere between three to six months’ worth of expenses set aside as an emergency fund. To calculate, you can include only your absolutely essential expenses for the month like rent, utilities, and groceries. If those essentials add up to $2,000 each month, then you should save $6,000 to $12,000 in an emergency fund.

If that amount seems unattainable, set a more realistic goal for yourself to start because the bottom line is any emergency savings are better than nothing. Just keep adding what you can to it. 

Other Ways To Prepare For Emergencies

In addition to setting money aside in an emergency fund, you can also better prepare yourself for emergencies by taking steps to either prevent them from happening in the first place or lowering the cost when they do. Here are some high-impact strategies for keeping your unexpected costs down:

Keep Up With Home And Car Maintenance

Putting off oil changes and ignoring your check engine light can end up costing you $8,000 or more in major engine repairs later and shorten your vehicle's lifespan by as much as 50,000 miles. Putting off annual home inspections and maintenance can lead to similarly hefty repair costs down the road. If you’re living paycheck to paycheck and avoiding these routine costs because you just don’t have the cash, there’s a lot you can learn to DIY, like oil changes and filter replacements.

Join a Dental Savings Plan

One of the biggest unplanned expenses people face is emergency dental work. According to the National Institute of Health, 90% of U.S. adults have some untreated decay in their teeth. But with 77 million Americans living without dental insurance and millions more with limited coverage that rarely covers the cost of even one major dental procedure, many put off treatment because it’s just too costly. 

With root canals costing anywhere between $1,000 and $4,350 and dentures as expensive as $28,000, even those with a healthy emergency fund can end up taking a huge hit if they need urgent dental care. 

Fortunately, there is a way to avoid draining your emergency fund or going into debt to take care of your teeth: a dental savings plan.

Dental savings plans are membership programs that allow plan members to save 10% to 60% on virtually all dental procedures ranging from routine cleanings to more expensive treatments like root canals and dentures. Those steep discounts can turn an unexpected dental emergency into a much more affordable procedure. Plan members can also get similar discounts on preventative care to lower the risk of needing that more expensive work. Many plans even offer savings on cosmetic and restorative care that may not be covered by your dental insurance. No annual limits (save every time) and no restrictions based on health conditions.

To get the discounted prices, you simply have to join a plan that includes the procedure you need and is accepted by a dentist near you. Then, show your membership card to that dentist, and you’ll be billed the lower rate. 

With over 140,000 dentists participating in a dental savings plan nationwide, it’s easy to find one in your area. On DentalPlans.com, for example, you can search a marketplace of thousands of dental savings plans and filter by location, procedure, or dentist to find one that meets your needs. You can also find plans that offer discounts on vision care and prescription medications to cut costs further. 

Consider Life Insurance And Disability Insurance

In the case of sudden death or disability, even a 3-6-month emergency fund may not be enough to cover the lost income—especially after you factor in funeral expenses or, in the case of disability, the cost of medical care. A life insurance or disability insurance policy can protect your family from financial hardship in those worst-case scenarios. 

Visit DentalPlans.com for more information. 

Discount Health Program consumer & provider surveys indicate average savings of 50%. Savings may vary by provider, location, and plan.

This post contains sponsored advertising content. This content is for informational purposes only and not intended to be investing advice.

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