Here’s a sorry statistic for you: 62% of Americans have less than $1,000 in savings. Want more articles like this? Create an account today to get BiggerPocket's best blog articles delivered to your inbox Sign up for free For real. GOBankingRates recently released some survey results that showcase the sorry state of the average American’s finances. The results show, among other things, that over 62% of Americans have less than $1,000 in savings and that this is probably a conservative estimate. Many of the respondents said that they save “just the minimum balance requirement” to avoid fees — those minimums are often below $1,000 as well. Whoa! Put another way, this study shows that about two-thirds of our country is just one bad day away from being homeless! Even if they can access credit or borrow from friends or family, these folks are allowing events outside of their control to potentially devastate their finances. Now, I realize that everyone has a different viewpoint when it comes to savings and that savings accounts are currently notorious for historically low interest rates. So long as you thoroughly understand the ebb and flow of your income and expenses, the definition of “adequate savings” is free to vary from individual to individual. But I believe that for the vast majority of Americans, “adequate savings” is in the ballpark of at least $5,000 for a single young man or woman — and far more for the average family. But isn’t at least $5,000 an astronomical amount of money?? Nope. Five-thousand dollars is the bare minimum. Even thinking about investing, going on vacation, or purchasing luxuries before reaching that amount is dangerous, foolish, and greatly reduces your opportunity to build wealth down the line. Even those that are currently paying down high interest debt on things like credit cards or attempting to get current should probably pay those off after saving the first $1,000. The point of savings beyond that amount is, of course, largely to prevent high interest debts, and those should be paid prior to saving beyond that first $1,000. But I digress. In this article, I’ll explain not only the enormous risks that 62% of Americans are taking by failing to save, but also the incredible opportunity cost of failing to save. Now, I normally wouldn’t feel the need to spell out the risk of not having any money saved up for a rainy day. That should be obvious. Unfortunately, it seems clear that Americans must not understand the importance of a basic level of savings. The only explanation I can give for this systemic fiscal irresponsibility is that at least 62% of Americans are simply uneducated on the risks and consequences of failing to save and build a sturdy financial base. Now, I often hear from folks that some people simply can’t save. That Americans are being squeezed by “the man” and don’t have the ability to sock away their earnings. I’m not referring to the rare exception of the person that simply cannot get by, who is working two jobs, living cheaply, thoughtfully planning his or her budget, and still can’t save. If that person exists, he or she is excused from not having savings. I will say that I have been searching for several years for a way to work with the person I just described and have yet to meet someone who fits that description. Everyone I’ve worked with, including some with shockingly desperate personal situations, is capable of saving after a little bit of basic financial planning and sticking to a dedicated plan. Related: 5 Ways to Use Real Estate Investing to Teach Your Kids About Finance Every able-bodied and able-minded person capable of reading this can and should have more than $1,000 in savings. Plain and simple. Those who don’t are taking a terrible gamble with their lives, living needlessly and dangerously on the edge. And it’s not just about risk. They are forgoing the chance for a better life as well. It’s seems likely to me that many people, perhaps even a majority of Americans, don’t understand that savings have a far more positive impact than merely limiting risk or keeping folks afloat in hard times. Liquid savings actually lead to incredible opportunities to live a better life by increasing career opportunities, allowing folks to save money just by having savings, and providing the basic building block upon which to begin investing. With that, read on to learn about the obvious risk of failing to save and perhaps even more importantly, the not-so-obvious opportunities afforded to savers. The Obvious Risk of Failing to Save Ever met anyone who’s never had a bad day? Yeah, me neither. Bad things happen, and the accompanying large expenditures of time and money that go into resolving them are a part of life. It’s not “bad luck” or “unfair” — it’s life! Get over it. It’s impossible to predict when life is going to happen to you, and it’s equally impossible to predict the exact financial consequences of life. But it is an absolute certainty that life will happen. It’s not a question of “if,” it’s a question of “when” you’ll get slammed. You have a choice. You can either be prepared to handle life. Or you can fail to prepare. That choice is made today, here and now in the present. If you make the choice not to prioritize savings, then you and I may work together one day. I help the poor and homeless work through their financial crises, get them into shelters, and teach them about how to make the long, hard climb out of financial destitution and institutional dependency. Their goal is to move forward on a path to financial dignity and independence. I often hear about their “disasters” and how unlucky they were and how money is evil. If you do save, we’ll never meet, and you may be reading this and trying to think about the last time a “disaster” nearly ruined you. Your $10,000 in the bank was barely dented when you were terrified that your kid was sick and took him/her to the ER. That same night threw the non-saver’s life out of control and into a devastating spiral of debt and delinquency. A question that I often pose to those that I work with is this: What’s the difference between someone with no or low savings and a homeless person? The answer (stated earlier) is this: One bad day. A really bad day can happen to anyone. I don’t care how savvy you are with finances, how great an investor you are, or how much money you make. The only thing that gives you a chance against long-term financial devastation is simple consistency. Saving consistently provides the buffer needed to stop debt pile-on in its tracks, to cover things like the windshield crack, the midnight ER visit, or identity theft before they are able to disrupt your life. The Not-So-Obvious Opportunity Costs of Failing to Save Most people think that the reason that they have no savings is because they have no income. I’ve found that the opposite appears to be true — those with no savings often have no or low income. It’s probably a chicken or egg argument. But I’d simply ask that for the next few minutes, you entertain my “egg” side of the argument and ponder if my case may actually have some merits — that those who save are thus able to increase their income and both earn and save more in perpetuity. With that, here are three arguments that I’d make for why savings precede income — and not the other way around. Argument #1: Savings increases employability and salary potential. The fact of the matter is that a solid savings account offers individuals a high degree of stability in their lives. The guy with the great credit score and the solid savings account is far more likely to avoid problems that would prevent him from showing up to work, becoming distracted, having money related family problems, and most assuredly has something to lose. This makes him a much better prospect as an employee. He is unlikely to do something stupid compared to the guy that is barely scraping by and has to scramble every single month. He is also unlikely to be followed by “bad luck” or “crazy family problems” that force him to miss work. This means that he will be more likely to get the job, keep the job, and get promoted. Ever wonder why so many employers check your credit score? It’s for this reason. Savings, a solid credit score, and a basic ability to remain consistent with finance indicates a much better employment prospect than the non-saver. Argument #2: Savers can exploit new job opportunities. Aside from being a better employee, a solid savings base also means that one doesn’t need the job as badly. Not needing the job as badly is very critical in the world of employment. It allows for negotiation, advancement, and the ability to jump ship. When you don’t desperately need to hang onto your job, you can relax a little, think through difficult problems, enjoy your pace, and most importantly, jump on opportunities. Related: How to Get Out of Debt: 5 Steps Toward Healthier Money Habits Think about this: Suppose two folks worked the same job at $30,000 per year and had the opportunity to get a new job for $50,000 per year. The catch is that it would take six months of training before you could start the $50,000 per year job. Well, the guy with $10,000 in the bank is going to be able to pounce on the opportunity. The guy with $500 has no choice. He will drown over the six month work hiatus. He’s stuck. Eighteen months later, the saver is making $1,600 more per month than his counterpart. These two started in the same place, with the same skillset. But one was a saver. The other spent everything. The interesting part is that the non-saver usually doesn’t even know he missed an opportunity. It’s not even a consideration to stop working for six months because he has no savings. I see this reality unfold for people at every level of income — from those making $25,000 to those making $125,000. Those who don’t save, those who spend all of their paycheck, are imprisoned at their current jobs, unable to pursue their passions or scale their income, and just one bad day from facing a disaster that can force them to uproot their lives. Argument #3: Savers can invest. The last piece of the pie here is that a large savings account or liquid reserve can allow you to make “investments” that save you money or gain you access to opportunities that others can’t. Now, I’ll admit that for a while I personally used to keep a very small amount of money in the bank because I felt that the low interest rates on checking and savings accounts were an opportunity cost that I couldn’t justify. I’d feel that every dollar not invested in the market was a lost opportunity to earn returns. Earning less than 1% on a savings account seems unacceptable on the surface to anyone that considers themselves an investor. Now that I’ve significantly upped my savings account to $7,000, I realize just how foolish I was to attempt to invest in stocks and bonds before achieving an adequate level of personal savings. Not just because I took the risks noted above, but also because I was foregoing the “returns” that a strong savings account offer to me and other savers, such as the following: A saver might be able to take out an auto or health insurance policy with higher deductibles, lowering their premiums. A saver can make bulk purchases on necessities, saving greatly on a per unit basis — think buying a month’s worth of groceries from Costco for $200, rather than four weekly trips to the grocery store at $75 each. A saver can pay cash for larger purchases, like a used car, major repair, or recreational pursuit, allowing them to get excellent deals and close more quickly. A saver can pay for things totally in advance. A large savings account eliminates the need to access investments to cover large expenses, reducing transaction costs. Conclusion There is no adequate excuse for failing to pile up a savings account of at least $1,000, even for those in the most dire financial positions. The statistics cited by the GOBankingRates survey are unacceptable. I recently worked with a woman who earned less than a few hundred dollars per month in income here in Denver (not a cheap place to live). She also had tens of thousands of dollars in delinquent debts, with about $3,000 – $4,000 more imminently threatening to pile onto that sum. In less than one month, she was able to build up an emergency fund of $1,000, with a little planning, a pickup of some well paying holiday retail hours, and a little help from some family members who offered to babysit while she worked hard at her second job. Not only that, but in less than a month, she also began to start paying down some of her urgent debts. I look forward to seeing her progress over the next six months as she snowballs forward with her finances. If she can do this, anyone can. For the vast majority of Americans, savings accounts really need to approach at least $5,000, but will of course fluctuate depending on lifestyle and risk tolerance. Savings are more than simply a baseline defense mechanism — they afford basic stability, access to opportunity and are simply the best investment around for the reasons explained above. If you don’t have savings — liquid or close to liquid capital that you can comfortably access to cover emergencies and pounce on opportunities — get your act together. It’s long past time. Do YOU believe a solid savings account is absolutely essential? What can Americans do as a whole to begin to solve their financial failings? Let me know your thoughts by leaving a comment below.