Emergency Savings: Why Americans Regret Not Saving & How to Avoid It

Do you have financial regrets? Here's how to avoid some of them.

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Key points

• A recent survey shows that 28% of Americans wish they'd saved more for emergencies.
• Making regular contributions to your emergency fund is one way to avoid financial regrets. 

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There's a saying that goes, "If I had a penny for every decision I regret, I'd be rich." But unfortunately, financial regrets often cost us money rather than making it. According to a recent survey from ConsumerAffairs, 1 in 5 Americans say they always or often regret their financial decisions. In addition, almost one-third of respondents regret having too little in the way of emergency savings.

Emergency savings matter

An emergency fund that covers three to six months’ worth of living expenses is essentially a financial cushion against whatever life throws at you. Whether it's a job loss, a medical emergency, or unexpected home repairs, having money set aside means you can handle it without going into debt.

But for many, building up that fund is a daunting prospect. It's one thing knowing it's important, it's quite another carving out spare cash to make one. Perhaps that’s why so many people think their emergency funds should be bigger. It can be hard to put money aside for problems that haven't happened yet. Even more so if there are already a thousand and one more pressing demands on your monthly budget. 

Don't be driven by regret

One of the best ways to shake off feelings of regret is to take action. Look at your budget and see how much you can realistically put toward your emergency fund. Set yourself a goal that's achievable, and give yourself time to build up your emergency stash. Here are some guiding principles that might help.

1. Take it slow

Don't treat building an emergency fund like a crash diet. If you try to take drastic measures to quickly shore up your cash reserves, there's a good chance you'll end up resenting it and giving up after a couple of weeks. But if you can carve out $5 or $10 each week, you could save $280 or $560 in a year. Set yourself a realistic goal based on your financial situation.

One popular tactic is to automate regular contributions to your savings fund, so it happens without any extra effort. You can also look at savings apps that "keep the change" -- this means they round up each transaction and put those small amounts into your emergency fund. If you get an unexpected windfall, like a bonus, tax refund, or gift, put some (or all) of that into your emergency fund too. Most of all, remember that building your reserves is a marathon, not a sprint.

2. Cultivate a different mindset

When I first started saving, I had to change my way of thinking. The big switch was to stop seeing it as a chore and find ways to take pleasure in stashing money away. Everybody is different, but for me it helped to see it as planting seeds for the future. 

Instead of treating myself by going shopping or paying for a nice meal in a restaurant, I learned to see my savings as a gift to my future self. I set myself goals and consciously enjoyed the sense of accomplishment when I met them. And as those savings grew, the peace of mind I got from having money in the bank was a refreshing change from the financial unease of not having extra cash.

3. Don't dip into your savings

No matter how great the temptation, don't spend your emergency fund for anything that's not, well, an emergency. It helps if you keep your emergency stash in a separate savings account -- that way there's less temptation to dip into it. Look for a high-yield savings account you can access easily in the event of an emergency.

That doesn't mean you shouldn't touch that money in the event of an actual emergency. That's what it's there for. But be honest with yourself. No matter how much you think you need a vacation, that desire does not constitute an emergency. If you need to dip into your fund, make it a priority to build it up again once the crisis has passed.

Bottom line

Our lives are full of things we think we should be doing. We tell ourselves we should eat more healthfully, exercise more, use our time more constructively, or save more money. But those "shoulds'' often lead to regrets, no matter how true they are. And regrets can eat away at us, especially in the middle of the night. 

If you can take the "should" out of saving and make it something you want to do, you're already part way there. The next step is to make it an achievable part of your weekly or monthly routine, and resist the temptation to use it for anything other than a true emergency.