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Emergency Savings: Why It's More Important Than Ever

by Jesse Campbell on
8/24/2025
in Budgeting and Building Savings
Couple sitting on couch reviewing finances together.

In today’s uncertain economic climate, having an emergency savings account is more than just a financial best practice—it’s a lifeline. Between inflation, layoffs, and rising costs, Americans are facing significant financial challenges. If you’re working on paying off debt, building an emergency fund may feel impossible, but it’s actually one of the smartest steps you can take to protect yourself and your family.

Why an emergency fund is critical right now

Bankrate's 2025 Annual Emergency Savings Report offers some distressing statistics about the state of emergency savings accounts in American households:

  • Less than half (46%) of Americans have the savings necessary to make it through three months without income.
  • Over a third (37%) of Americans have tapped into their emergency savings in the past 12 months.
  • A third (33%) of Americans have more credit card debt than emergency savings.
  • Nearly a quarter (24%) of Americans have no emergency savings at all. 

The financial outlook for the next few years remains unpredictable. There are plenty of factors we can’t control, such as tariffs, inflation, volatile job markets, etc., but what we can control is how prepared we are for unexpected expenses.

An emergency fund acts as a safety net. It allows you to cover sudden costs, like a car repair or medical bill, without turning to credit cards or loans. This is crucial because relying on credit often means adding interest charges, making the expense even more expensive in the long run.

How lack of savings can trap you in debt

Without savings, an emergency can easily spiral into a cycle of debt. Here’s how it typically happens:

  1. A surprise expense comes up.
  2. You don’t have the cash to cover it, so you use credit.
  3. That expense becomes even more costly because of interest.
  4. Now you’re less prepared for the next emergency.

When the next big expense hits, you repeat the process, pushing yourself deeper into debt and further away from financial stability.

Can you save and pay down debt at the same time?

Yes, it’s entirely possible. Here are a few strategies:

  • Automate your savings. Set up direct deposit so a small portion of each paycheck goes straight to your savings account. Budget with what’s left.
  • Consider a side hustle. Extra income can go toward either your emergency fund or debt repayment.
  • Focus where it matters most. If your debts carry high interest rates, it may make sense to prioritize paying those down first. Once they’re gone, redirect those payments to savings.

Even small contributions matter. Saving $10 or $20 per paycheck adds up over time, and it’s better than saving nothing at all.

How MMI can help

At MMI, we understand the challenge of juggling debt repayment and savings goals. Here’s how we help:

  • Spending analysis: We review your budget and identify areas where you can save without sacrificing essentials. Best of all this is 100% free and available 24/7, online and over the phone.
  • Resources and education: Our experts provide tools to reduce expenses and improve your financial habits.
  • Debt relief programs: If high-interest credit card debt is holding you back, our debt management plan (DMP) can lower your interest rates and consolidate payments—helping you pay off debt up to 7x faster than doing it on your own. And if you're struggling with debts in collection or simply can't afford to repay your debts in full, our debt resolution plan (DRP) is a nonprofit alternative to for-profit debt settlement, with lower fees and a more transparent, consumer-first approach.
  • Future planning: Once your debt is gone, we can help you develop a new budget and encourage you to keep making the same payment, only now, it goes straight into your emergency savings account.

What if saving feels impossible?

If you feel like you’re barely making ends meet, you’re not alone. But here’s the reality: not saving is more expensive than saving. Every time you borrow for an emergency, interest eats away at your future financial security. Even small sacrifices today can mean big relief tomorrow.

If what you’re doing isn’t working, it’s time to try something different. MMI offers free, no-obligation financial counseling online or by phone, available 24/7. Whether you’re looking to reduce debt, build savings, or both, we have options to fit your situation.

Tagged in Goal setting, Advice for families, Navigating change

Jesse Campbell photo.

Jesse Campbell is the Content Manager at MMI, with over ten years of experience creating valuable educational materials that help families through everyday and extraordinary financial challenges.

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