Tax time is a perfect time for members to build an emergency fund

February may be the shortest month of the year, but it has more than its share of ‘surprise’ holidays. What I mean, are holidays like Valentine’s Day and President’s Day, that kind of sneak up on you.

The problem is, they also sneak up on your members as well. A long weekend and a romantic holiday can cost some serious money, just 6 weeks out from Christmas.

And this year, the government shutdown also added to a lot of people’s financial surprises.

The fact is, consumers tend to not to take them into consideration and it’s why many consumers end up using their savings as their emergency fund. Or worse, they drop these surprises on their credit cards and hope to pay them down when they get around to it.

In most people’s case, “emergencies” like these make saving hard.

According to personal finance site Bankrate.com, 29% of consumers have more credit card debt than they do savings. That number has grown nearly 50% since the same question was asked last year.

It has also been reported that 60% of Americans don’t have $1000 cash on hand for an emergency room visit or a major car repair. While wages have been growing, “real” wages (accounting for inflation and cost of living) have declined 1.3% since 2017, according to salary comparison site Payscale.com.

That’s why 7 million vehicle owners in the US are 3 months behind on their car payments. And it’s a testament to the fact that while the economy is doing well, it doesn’t mean everyone in it is sharing those good times.

Credit Unions see this better than anyone. That’s why it’s important for CUs to reach out to their members and encourage them to put some funds aside every paycheck and build an emergency fund.

Ideally, it should be a separate savings account that members can add to for unexpected or unplanned for events. This emergency fund is a buffer between high-interest credit cards and tapping into savings.

During this time of year, this is a powerful message because most people spend their tax refunds on paying off this credit card debt or replenishing their depleted savings. But this year, refunds have been slowed by the government shutdown, and they’re also averaging almost 10% lower than last year.

Plus, many people see their tax refunds more as “fun money” than a way to build a long-term financial strategy, no matter how well-intentioned they were before the refund check arrived.

That’s why this is a great time to remind your members that having an emergency fund isn’t hard and makes a lot of sense. And there’s no better time to start it.

Setting up an emergency fund (i.e., a dedicated savings account that they can easily set up with you) is the first step and tell them how easy that is and how socking a little away every month, means the big and little unexpected things aren’t so daunting. Also, if you have a PFM, having them add it to your PFM can help them keep tabs on their savings and spending goals.

The name of the game is setting a little money aside over time, so it accumulates into something real and substantial. For example, the average spending on Valentine’s Day is $220 per person. Instead of sticking Valentine’s Day on a credit card, if members were socking away $50 a week – slightly more than $7 a day – since January, they would have Valentine’s Day covered without reaching for a credit card or moving over savings.

Setting up budgets and spending goals in their PFM is a great solution to help them do this. And they don’t have to itemize each event – keep it general at first, like Holidays, Car Maintenance, etc. Just putting in a small amount over time makes a big difference.

If they’re moving toward budgeting their money more strategically, they can truly enjoy the good things in life and take a lot of the stress out of the bad ones.