Covid-19: Build an Emergency Savings Fund Even During a Worldwide Pandemic

• Author: William Asher
• Posted: 2024-09-30

Congress has just passed a $2 trillion stimulus package to shore up the American economy and prevent another depression like the one that manifested during the stock market crash of 1929. Main Street and Wall Street will benefit from the massive spending package. It is the largest one of its kind, one that President Trump stated he couldn't foresee.

Many Americans and immigrant workers employed in the hospitality and the non-profit, governmental sector have lost their jobs. Soon these workers will be applying for unemployment benefits. If you happen to be one of these affected workers, you can still save a significant portion of your unearned income for a rainy day that happens to be now.

While most Americans are quarantined inside their homes, the President indicated he would like to jumpstart the economy in areas that were the least hard hit by the impact of the coronavirus. The stimulus bill will include several benefits for the nation's workers:
 

• Most adults will receive stimulus checks up to $1,200.


• Income-eligible households with children under the age of 17 will receive $500 per child.


• Unemployed workers will receive benefits for a maximum of 39 weeks which should last until the end of the year.


• Owners of small businesses and the self-employed will be eligible for loans. The loans will covert to grants if workers are not laid off.


 

 

Emergency Fund

Most people think that the emergency fund is a previous stash of liquid funds that can be accessed at any time. However, during a crisis, you can accumulate a viable emergency fund to cover the next unexpected expense. This will introduce a new approach to your next savings goals.

Start with a small amount. Most people don't have $400 in a bank account to cover say a large electric bill, rent payment, transportation, or a doctor's bill.

You may have heard that you need at least three to six months of living expenses in a savings account to carry you over if there happens to be an emergency. For the current climate, it may be quite challenging to save this amount of money aggressively before the next crisis.
 

Saving Unexpected Income

Once you have your stimulus income, plan to save a portion of the funds for the next emergency. If you are employed, check your upcoming schedule to determine if there will be any shortage of hours. Afterward, understand your entire financial situation. Review all your credit lines on each credit card and determine the total amount for all liquid assets inside bank accounts and brokerage accounts.

John Thompson, Financial Health Network Chief Program Officer, advises workers to contact each credit card company to understand your credit utilization. That way, you will know how much you can spend if you need to buy groceries, get a prescription, or take a taxi ride to pick up vital necessities.

Say, for instance, you are expecting a lump sum payment - rebate tax check, inheritance, or a windfall - set aside at 20% of the amount in a separate savings account. JP Morgan Chase Institute states that the average American with dependents receives $3000 in tax rebates annually.

As you plan to spend your funds for regular invoices and home repairs, don't forget to earmark your funds for the difficult days ahead. In light of the circumstances, Congress may approve additional funds if the virus dissipates later rather than sooner.
 

Crunch Finances

Just in case you find yourself in a crunch and you have nothing saved in your savings account, consider the following options. First cut any unnecessary expenses like the premier gym membership, extra cable channels, outsize cell phone plans, farm-fresh food delivery, and multiple magazine subscriptions. This will give you additional savings to put into your bank account.

If the crunch is more than you expected, consider tapping into your home equity line of credit. Just remember, if you cannot afford to repay the loan, the bank may foreclose on your homestead. And temporarily reduce the amount of money you put into your retirement and 401(k) savings account. Redirect those funds to another account or use the funds for your emergency expenses. As a final resort, consider a hardship withdrawal from your retirement accounts or pension funds.

America now has the most coronavirus cases worldwide. Know your safety net options. The government provides SNAP food benefits, WIC, and Medicaid for eligible participants. Identify local food banks that provide fresh food for your neighborhood.

Once you have the savings fund established, don't feel bad when you absolutely must tap into the funds. The emergency funds account is designed for interdependency. Use the funds wisely. Just don't forget to replenish the funds once your finances are back to normal.