A Little Goes a Long Way: Just $100 in Savings Can Help Families Stay Afloat

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Can't save a lot? Don't worry — as little as $100 in savings can be a huge help.

Families with more than $100 in savings are better able to avoid high-cost borrowing such as predatory lending and payday loans, and keep utilities on, and they are more financially satisfied than those with less saved, according to a December study by the FINRA Foundation, established by the self-regulatory organization for brokers to help the underserved, and SaverLife, a nonprofit focused on financial security.

More than 1,100 SaverLife members participated in the survey between February and May, and were compensated between $5 and $15 for their responses. The study also used account data from 687 members that had three-month average daily savings balances available.

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"There's a lot of volatility in family finances in this country, particularly for lower-income people," said Leigh Phillips, SaverLife's CEO. For many in low-wage jobs, their expenses and paychecks might not always match and one unexpected event — such as a sick child or broken-down car — can set off a significant downward spiral.

On the flip side, even maintaining a small amount of liquidity in family finances can help people stay on track through an emergency.

The results are encouraging in light of data from the Federal Reserve showing that 37% of adults could not cover a $400 emergency expense in 2019, before the coronavirus pandemic hit. While that's still a concerning statistic, the survey showed that having smaller amounts saved can keep families from devastating events.

Only 17% of those with more than $250 saved had to move for financial reasons in the last five years, compared to 29% who had less in the bank. In addition, only 19% of those that had saved more than $100 had their utilities shut off in the last five years because they didn't pay bills, versus 37% with less than $100.

The results are especially important amid the coronavirus pandemic, Phillips said. Economic and financial uncertainty is even higher for low-wage folks, who have been more likely to face unemployment due to the Covid crisis.

"We really see how many cracks there are in our financial system and how unequal that system is," said Phillips.

Tips for saving

For those who may not make a lot of money and have trouble saving, there are a few tips that Phillips recommends that can help build up even a small safety net.

1. Just get started: "It doesn't matter if it's $5 a paycheck," said Phillips. Setting aside even a small amount in an emergency savings account gets the ball rolling.

2. Set an attainable goal, even if that's a small amount: For many, the traditional financial advice to have three to six months of living expenses in savings is unattainable and can be discouraging, said Phillips. Having a smaller goal, such as $100, can still be beneficial, according to the survey.

3. Plan and save when you can: Having a savings plan also helps people stay on track. Phillips recommended automating saving if you can, either by setting up a payroll deduction, automatic transfer or using an app that will do some of the work for you.

In addition, if you can't save consistently but know you'll be getting a chunk of money such as a stimulus check or a tax return, plan to save a portion of those funds.

"Think about what you're going to do before you get the money" said Phillips.

4. Celebrate small wins: Even if something does come up and you have to spend down your savings account, that's also a win that should be celebrated, according to Phillips.

"The goal of savings is to use it when you really need it," said Phillips.

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