By James Owen, 2016-2017 Southern Bancorp Fellow
For the past fifteen months, I have worked as a policy fellow at Southern Bancorp, learning about smart savings habits and benefits, statistics about individual and family savings, and Southern’s many savings services and products. Yet while I have been preoccupied with getting ready for graduate school in North Carolina, I’ll admit that much of what I had learned had not been at the top of my mind. However, everything quickly came rushing back as I recently stood on the shoulder of Interstate 40, staring at a blown out tire, calculating the inevitable costs.
Tow Truck……………….$175
New Tire..……………….$200
New Tire Installation..…..$75
Rental Car, insurance, and gas (1 day)……………….$145
In the blink of an eye, I was up to $475, and suddenly I realized the impact of what I had learned at Southern Bancorp.
For many families, a lack of ready-to-use savings means that having an unexpected expense (like a ruined tire) can potentially cascade into a myriad of other negative financial problems and lead to predatory high-interest loans or other high cost alternative financial services.
Such companies lend the small sums needed but at annual percentage rates of three hundred percent or more, and according to research from Pew, the average payday loan borrower must pay back $400 within two weeks, yet can only afford a $50 payment. Too often, this results in a never-ending cycle of debt and an average of $500 in additional fees over five months.
Only 14% of borrowers can afford to repay the loans with their monthly budget.
I was lucky. Because of what I had learned at Southern, I had been automatically putting back $25 from every paycheck for emergencies, meaning that I had enough to cover my unexpected tire expenses. So while I hated to see that money leave my account, I was also happy that my work had paid off.
I’m now a firm believer in the idea that financial wellness starts with saving. So take it from me… start saving today and reduce your stress tomorrow, so that when an unexpected financial event occurs in your life, you can get back on the road as quickly as possible.