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How to Build an Emergency Fund in the Middle of an Emergency

The New York Times

By Ann Carrns March 20, 2020

The coronavirus is rapidly slowing the U.S. economy and disrupting jobs. If you don’t have a rainy-day fund already, it’s time to set aside whatever cash you can. Most people think of an emergency fund as something saved gradually, over time. But the crisis is here now for many people — or soon will be, in the coming weeks — so a different approach is needed. “It’s hard to save a lot of money quickly on a modest income,” said Stephen Brobeck, senior fellow with the Consumer Federation of America. And compared with the last downturn, he said, the current economy has many more people in “gig” or freelance jobs, who generally aren’t eligible for unemployment benefits and whose fluctuating income makes it hard to save. Cash assistance may be coming from the federal government as part of its response to the virus outbreak, but details are uncertain. So making a plan on your own is wise.

“The answer can’t be to do nothing,” said John Thompson, chief program officer of the Financial Health Network, a nonprofit focused on financial innovation. One reason for hope: Even small cash cushions can help people stave off disaster. As little as $250 can significantly reduce the risk that a family will miss paying a utility bill or be evicted, research suggests. “Each extra dollar saved” reduces the likelihood of having to skip bill payments, said Mariel Beasley, a co-founder of Common Cents Lab, a financial research group at Duke University.

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