smart spending

The rules about using emergency savings

3 in 5 Americans don't have enough in savings to pay for the unexpected, like an emergency room visit or a car repair. If faced with such an expense, many say they'd reduce spending, borrow from friends and family or use a credit card, breaking Money Rule No. 29: "Use your emergency savings for emergencies." I'm Jean Chatzky, and this is Money Rules.

The good news? Eighty-two percent of Americans say they are budgeting. The bad? They don't appear to be budgeting in savings as an expense, which would allow them to build an emergency cushion. The beauty of an emergency savings account is that when an unexpected, but necessary, expense comes your way, you can dig into that account, rather than float the bill on a credit card.

As for how to get that money in the bank, the best way is slowly but surely. Go over your budget and add a line for emergency savings, even if you can only squeeze in $20 each month. Then when an emergency pops up, don't be afraid to use the money you've set aside. You can replenish it when you're out of the woods.

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