Money Management

Many younger Americans don’t have the cash reserves to cover 90 days of expenses. Read on for ways to grow your savings into an adequate emergency fund. 

Many Americans struggled financially in 2023 due to persistent inflation. And younger Americans were no exception. It’s therefore not surprising to learn that as of last year, 56% of Gen Zers aged 18 to 26 could not pay for three months of living expenses out of savings, according to data from Bank of America.

That’s problematic, though, because when it comes to emergency savings, the general consensus is that it’s important to have enough cash in the bank to pay for three months of essential bills at a minimum. The logic is that if you were to lose your job, it might take you three months from start to finish to find a new one. And without an adequate savings account balance, you might have to resort to debt to pay your bills. That’s debt that could linger for a long time, especially if you have to fall back on a credit card with a high interest rate.

If your emergency fund needs work, there are a couple of things you can do to boost it. And the sooner you do, the better.

Cut back on spending

You may be surprised at how much impact mindful spending has on your savings. Cutting back on every single luxury you enjoy is no way to live. But if you look carefully at your current set of bills, you may find that there are several things you’re paying for that you can pretty easily do without.

Imagine you’re currently spending $50 a month on a gym membership you use once a week at best. Could you replace that workout with one you do at home, or on a walking trail? If so, that’s an extra $600 a year that could go into your savings.

Similarly, maybe you enjoy ordering takeout twice a week. That’s understandable. But could you manage with one takeout meal a week? If so, you might conceivably save $20 a week by replacing one ordered meal with food you cook. That’s over $1,000 saved in the course of a year.

Join the gig economy

If your emergency fund is nowhere close to covering three months of essential bills, then it might take more than just cutting some expenses to give it the boost it needs. To that end, it pays to look at the gig economy.

There are many flexible side jobs you can take on that have the potential to put a nice amount of cash in your pocket. You could drive for a ride-hailing service, work for a delivery service like DoorDash or Instacart, or even see if there’s work you can do from home at your own pace, like data entry. The latter may be a good option if you don’t have access to a car.

RELATED: Emergency Fund Calculator

It’s important to set yourself up with enough savings to get through a financial emergency, whether it’s the loss of your job or an expensive home or vehicle repair. You may not get to three months’ worth of savings this month or next. But do your best to slowly but surely work your way toward that point over time so you’re able to get there eventually.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Bank of America is an advertising partner of The Ascent, a Motley Fool company. Maurie Backman has positions in Bank of America. The Motley Fool has positions in and recommends Bank of America. The Motley Fool has a disclosure policy.

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Interested in a new mortgage this year? It may be a smart move to refinance despite rates being higher. Read on to learn more. 

In 2020 and 2021, when mortgage lenders lowered their rates, many homeowners rushed to refinance their mortgages. But rates have climbed a lot since then, so these days, refinancing a mortgage is a less appealing option.

The average cost of signing a 30-year mortgage loan today is 6.6%, according to Freddie Mac. And mortgage refinance rates are often a notch higher than purchase mortgage rates, which means that if you’re looking to refinance today, you might pay a bit more.

But even though mortgage rates are elevated these days, that doesn’t mean refinancing is automatically a poor choice. So before you write off the idea, ask yourself these questions.

1. Has my credit score improved a lot since putting my mortgage in place?

Your credit score tells lenders (mortgage and otherwise) how risky a borrower you are. If your credit score has improved notably since putting your current mortgage in place, you may be eligible for a lower interest rate on a mortgage than the one you originally locked in, despite today’s borrowing rates generally being high.

On the other hand, if your credit score isn’t in the best of shape these days, then it may not be a good time to refinance — even if the interest rate on your current mortgage is higher than the average rate being offered by lenders today.

That said, you may be able to boost your score by doing things like paying bills on time and checking your credit report for errors.

2. Do I have high-interest debt I need to pay off?

Let’s say you have a 3% mortgage now and the best refinance rate you can qualify for is 6.7%. You might think that refinancing is a silly idea. But it may not be if you have high-interest debt you’re trying to pay off, like a credit card balance.

Let’s say you owe $100,000 on a mortgage with a 3% interest rate, but you also happen to owe $100,000 across a bunch of credit cards charging 17% to 24% interest. If you refinance to a $200,000 mortgage (which may be possible with a cash-out refinance), your remaining $100,000 home loan balance will get more expensive. But you’ll lower the rate on your credit card debt a lot. So all told, you may find that refinancing allows you to lower the interest rate on your debt overall.

3. Am I looking to do a major home improvement that will better my daily quality of life?

Maybe your family has grown since you bought your home, and having a finished basement would give you all much more room to spread out. Or maybe you desperately need another full bathroom in your house, but you don’t have the $35,000 it’ll take to build it just sitting in a savings account.

As is the case above, a cash-out refinance could make sense in this situation. You might end up making your mortgage more expensive. But in exchange, you’ll get access to money that could allow you to complete a project that will greatly improve your quality of life. And remember, you could always refinance again to a lower interest rate in a few years if borrowing becomes more affordable at that point.

For many people, it won’t make sense to refinance a mortgage in 2024. But ask yourself these questions to see if you’re an exception.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Maurie Backman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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