You read stories all over the place about how Americans are not saving.  A large percentage of Americans don’t even have minimal liquid savings for relatively small emergencies, let alone an actual job loss.

According to this article, 66 million Americans do not have any emergency savings.  And 47 percent of Americans say they could not afford an emergency expense of $400 without selling something or borrowing.

We hear from financial advisors about the importance of having an emergency fund.  Some recommend up to 6 months worth of living expenses.  Some will even recommend 9 months.

I think this can depend on the person’s illiquid assets and also their lifestyle.  If you have a few hundred thousand dollars locked up in a 401k with your employer, then a job loss would not be as devastating because you could access your 401k funds.  I know this is far from optimal, especially having to pay a penalty for early withdrawal, but at least you won’t be starving.

Lifestyle is particularly important.  If you make a six-figure salary and have a lifestyle to match it, then a good emergency fund becomes that much more important.

On the other hand, if you are young and single and you live on $2,000 per month, then you aren’t going to be too scared about a job loss.  You could pick up any old job to cover your living expenses if you have to.  Your bigger threat is an unexpected expense such as a costly repair to your car or house, or a medical expense.

If you own a house, then you should have a bigger emergency fund than if you are a renter.  If you own a house, then you know what I am talking about.  There are always unexpected happenings and maintenance expenses.  It is even hard to call them unexpected.  It would be more unexpected if you can go for a full year without having to call a plumber, electrician, A/C repair, or some other type of handyman.

But most Americans do not have an emergency fund of 6 or 9 months worth of living expense.  Most don’t even have liquid assets that could pay for one month worth of living expenses.  Part of this is our consumer-based culture.  However, a large part is the simple fact that government at all levels has made our lives so expensive and discouraged saving.

The thing that pains me the most though is that many people are just throwing money away because they don’t have any money.  I know this doesn’t seem to make sense at first, but let’s think about this.

If you don’t have any money, you end up paying out a lot more money in the long run.  Think about someone with credit card debt who is paying an interest rate of 15% on the balance.  For every month that balance is not paid off, more money is going out the door.

But it isn’t just straight debt where this situation arises.  In many cases, you get a discount for paying something in full.  I see this with homeowners insurance, car insurance, and several other things.

Let’s say your car insurance is $800 for a year.  You can pay the $800 at the start of your coverage for the year.  Or you can make monthly payments of $80.  Maybe there are options for quarterly payments or something like that, but you get the point.

In this example, if you pay $80 per month, that will be $960 for the year.  You could have just paid the $800 up front.  Instead, you paid an extra $160.  And in today’s near-zero interest rate environment, forget about the time value of your money, unless you were putting it into some kind of a successful start-up business at the time.

You would be surprised how many people will make the monthly or quarterly payment.  It has to be a large majority.  The only thing sadder than people not being able to pay the amount in full is seeing people who can pay the amount in full yet choosing not to do it.

If you have the money, pay the amount in full and take the discount.  Even if you are trying to build an emergency fund, there is no point.  If you have an emergency, you are still going to be paying $80 per month per the above example.  This is not analogous to paying off a 30-year mortgage.

Therefore, if you are among the many of struggling middle class Americans, you should at least strive to get a cushion and have some emergency savings.  You should at least have the savings available as part of your own “discount fund”, where you can take advantage of reduced premiums for paying expenses up front.

If you keep paying out extra, then you will never get ahead because your expenses will continue to be higher than they should be.

There is a saying that it takes money to make money.  This is not true, especially in today’s world, where many people start up on the Internet for a few hundred dollars or less.

However, this saying does apply to saving money.  It takes money to save money.  Make sure you are taking advantage of the discounts you are offered, especially on the big stuff.  It will add up to hundreds, perhaps thousands, of dollars per year.  It may also cost you less time, as you pay the bill once.