Monday, August 22, 2011

Cash in a Pinch

Could you come up with $2,000 within 30 days to pay an unexpected bill? Most Americans could not do this. Yet financial shocks of this size are not uncommon.

According to a study by the Center for Financial Security at the University of Wisconsin-Madison, people are reluctant to save for a rainy day because they think they will have more "financial slack" in the future. In other words, they think it will be easier in the future to come up with cash for an emergency, so they do not save ahead. This is an illusion, say psychologists. In the future, your finances will feel just as tight as they do today.

Source: Center for Financial Security, University of Wisconsin-Madison, Coming Up with Cash in a Pinch: Emergency Savings and Its Alternatives

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