During the Great Recession, many Americans struggled to make on-time mortgage payments, which led to millions of foreclosures. Not only did this force many people out of their homes, but these homeowners likely needed significant credit help, as foreclosures can significantly impact a person’s credit score.
According to a study from the FINRA Investor Education Foundation, many of these issues may have been avoided if homeowners had emergency savings. Household without a rainy day fund were found to be three times more likely to make a late mortgage payment and nearly twice as likely to be involved in a foreclosure.
“The Great Recession and the housing downturn devastated the finances of families across the country,” said FINRA Foundation President Gerri Walsh.”Data collected during this period, when many family budgets were stretched past the breaking point, suggest that having a rainy day fund can make the difference between being able to stay in your house and making late mortgage payments and facing foreclosure.”
Strategies to help people create an emergency fund
With emergency funds potentially making it more likely for a homeowner to make on-time mortgage payments, many may want to start utilizing these types of accounts.
1. Save your tax refund – One of the best ways to create an emergency cash fund is to save your tax refund. The majority of taxpayers receive a refund each year and it is often for more than $1,000. With that said, this can be a great place to start for people looking to begin a rainy day fund.
2. Find ways you can cut back – Another possible way of finding money to have emergency cash is to look for ways you can cut back. Examining your expenses to see if you have any unnecessary spending is a good place to start. For example, if you have a cellphone and still pay for a land line, it may be time to eliminate your home phone to allow you to have extra money available.
3. Sell your possessions – Going around the house and finding items you don’t use anymore could help you get some extra cash as well. If you discover any valuables you may be able to sell them online or at a pawn shop for some money that you can use to create an emergency fund.