How much emergency savings should you keep while paying off debt
It can be tricky to save for an emergency fund while paying off debt. Here's how to strike the right balance.
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Americans are continuing to face mounting financial pressure in today's economic landscape, and it's taking a major toll on their financial and mental health. One of the main drivers is inflation, which is climbing rapidly and driving up the cost of essentials, making it increasingly difficult for people to find room in the budget to cover the basics. In turn, more people are turning to credit cards to bridge the financial gaps. The problem with that approach is that credit card interest rates are elevated right now, and as the interest charges compound, it's adding even more stress to borrowers' budgets.
That strain is becoming clearer in terms of how people are managing their money. According to a recent study from Achieve , the growing debt burdens Americans are facing are taking a serious financial and emotional toll, with many borrowers reporting ongoing stress related to what they owe and their and monthly expenses. As a result, borrowers may think the best approach is to use every available dollar to pay down what they owe . But while aggressively tackling debt can be smart, focusing solely on repayment while ignoring your emergency fund creates a different type of financial risk.
In these situations, it's common for borrowers to end up relying on credit cards again as unexpected expenses arise, which adds to the costly debt cycle. The better approach is generally to find a balance between paying off debt and building an emergency fund. How much emergency savings should you really keep on hand while you're focused on paying off debt, though?
Find out how Achieve can help you get rid of high-rate debt now .