Episode Transcript
[00:00:00] Speaker A: Well, nearly one in four Americans have no emergency savings at all and would struggle to cover an unexpected expense. That's according to Bankrate. And having an emergency fund is really, really an important thing because we never know what's going to happen in life after all. Joining me now to talk more about that is Rod Griffin. He's senior director of consumer education and Advocacy at Experian. Rod, thanks so much for taking some time for me. I really appreciate it, sir.
[00:00:26] Speaker B: Well, thanks for having me.
[00:00:27] Speaker A: Well, no problem at all. It really is crucial to have some sort of backup, some sort of safety net. Right. I mean, but a lot of people, as we just said that that statistic there from Bankrate, one in four Americans almost have absolutely no emergency savings.
Why is it so difficult for so many of us to save money right now?
[00:00:53] Speaker B: Yeah, it's life is expensive.
And when you look at where inflation was over the last several years, coupled with the holidays just being, you know, just passed and people have what I kind of call the holiday hangover with their debts. You know, they're trying to pay down those credit card bills and debts they may have taken on during the holidays.
That puts a pinch on, on the bank account and can make it hard to set aside savings when it feels like all of your money is consumed and just paying the, the day to day expenses and reducing the debts you may have. So that makes it hard and it's, it's difficult to get started because of that.
[00:01:34] Speaker A: Yeah, it really is very difficult these days, as you say there. And I mean, you know, how much should people save in an emergency fund? I know that I've, I've heard different things from different folks. A sort of, you know, general guideline is like three to six months of expenses, some people say up to a year, some say not quite so much. What would you say is a good kind of goal for people to set for their emergency fund?
[00:02:01] Speaker B: Yeah, and you're right. The, the rule of thumb has been for many years, three to six months of sort of your daily, of your monthly living expenses, really. So things like your utility bills, your rent, your mortgage, food costs, those sorts of things. And that can be a really daunting number if you're trying to, you know, set a number to it and reach that goal. The problem with a goal that's large like that can be that it becomes discouraging and so you emotionally kind of check out and give up and, and that defeats the purpose. So my recommendation is start small and you maybe don't put a large number on it. Maybe It's I'm going to save $10 a month or $20 a month, whatever you have sort of cushion to do, and start setting that aside. And over time, it will build toward that larger amount. The key is to be able to stay motivated to build that habit of savings so that you are just kind of naturally putting savings aside over time.
The other thing that is important to focus on is finding ways to reduce your expenses because that gets in the way of saving.
And, you know, that means tracking your expenses, knowing where your money's going, where it's coming from. You know, I kind of think about, you know, you should be in control of your money. It shouldn't be in control of you, but that's the way it often feels.
And so if you track your expenses and know where they are and then look at ways you can reduce those expenses and. And not just the don't buy coffee once a week, which is a kind of the common one, but think about just the regular bills you have every month. People think of Experian as a credit bureau, which we are, but we're much more than that today. And one of the things that we kind of think about and aspire to be is to be a person's big financial friend, meaning we want to help them take control of their finances and to reduce the costs of everyday life. So we have, for example, a service that can help you reduce your auto insurance payments each month. Month.
We have a service that can help you identify streaming services that perhaps you've forgotten about or other subscription services and signed up for, for a sporting event or a movie that you wanted to watch and then just didn't use it again, but it's still, you know, being deducted every month. And it's an expense. We can help you find those and cancel them. We have a service that can help you negotiate regular monthly bills, things like utilities for many people to reduce those monthly costs. We have a credit card marketplace that can help you find credit cards that would be at a lower interest rate or lower fees that perhaps you could transfer balances to and pay them off faster. So think of Experian as more than just a credit bureau. It's really about your overall financial health. And saving means having money to set aside to save. And that requires reducing your monthly expenses.
[00:05:09] Speaker A: Yeah, absolutely right. And I sort of always think of it as, you know, pay yourself first. Right. It's like your future. You will. Thank you. If. If you do that. And. And an emergency fund is a big part of that. And of course, one of the ways too that I often hear about, you know, sort of makes, makes things easier. You were just talking about the subscription services and things like that that we all sign up for and then maybe we forget about, you know, after a certain amount of time. The same thing could be true in a positive way though if you kind automate some savings. Right. Just have a certain amount go into a savings account or whatever it might be and just really, you know, set that up to just automatically happen. Maybe you forget about that and then before you know it you've got enough saved up for your emergency fund.
[00:05:55] Speaker B: Right, right. It's that the old out of sight, out of mind thing. And out of sight out of mind can be good if you're automating those deposits and they're automatically going into a savings account, you don't think about it and it just becomes habit and you work with then living within the means that you have the funds that are left over.
But it could also be bad if it's out of sight, out of mind and I'm just not going to think about the bill I have to pay. Forgot about it and then I didn't pay it.
That's exactly the opposite. Now you're damaging your credit history potentially you're reducing your access or making access to financial services more expensive. So automating payments and automating savings can be a great tool for building that, that habit that just sort of becomes natural over time.
[00:06:47] Speaker A: Yeah, absolutely. Right. Well just about time for us to wrap things up. But anything else that you wanted to mention Rod, that we haven't touched on that comes to mind?
[00:06:57] Speaker B: Yeah, well, I mean being the retirement radio network, think about saving for retirement. If you work for a company that offers a 401k for example and they have a match, never forgo that match. Make sure you take advantage of that. If it's pre tax you can save potentially tens of thousands of dollars over your career if you're taking that match and putting money in the 401k. And if it's pre tax it likely won't affect your take home pay or will have very minimal effect.
So if you are not doing that, it could cost you a lot of money over know, 20 or 30 years.
So you know, make sure you're taking advantage of every savings opportunity you have. Not just what we think of as an emergency savings but also retirement savings as well because they play a part in that too.
[00:07:48] Speaker A: Yeah, 100%. I always tell people if you're not taking the, the match with your employer, if it's offered. You're telling me you don't like free money, and I don't believe that for a minute. So there we go.
[00:07:58] Speaker B: Enough with you on that one.
[00:08:00] Speaker A: Rod Griffin, senior director of consumer education and Advocacy at Experian. Thank you so much, Rod, for spending some time with me. Really do appreciate it.
[00:08:09] Speaker B: Great. Thank you. Glad to be here.
