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When you’re a first-generation American, building wealth can be quite difficult. Your family is navigating an unfamiliar financial system and you’re trying to teach them while also teaching yourself. What’s more, many of our families only learn how to do the necessary basics to survive — open a savings account and pay down debt — but they don’t learn how to thrive.
According a report from the St. Louis Federal Reserve, the median income of a foreign-born American is $20,400 a year, while a native-born American makes $28,000, so immigrant and first-generation families tend to have a longer way to go to amass wealth.
Here are some ways you can start making your money work for you so you can build long-term wealth.
1. Start building an emergency fund
Unexpected expenses may pop up from time to time, so one of the best things you can do is make sure you’re financially prepared for them. An emergency fund is money that you use for unforeseen expenses, like a medical bill, job loss or an unexpected home repair.
It can be a crucial part of wealth building because it is designed to help you cover these surprise costs without having to take on additional debt. So instead of defaulting to a credit card or a personal loan to pay for an emergency, you can pull from a fund you saved specifically for these instances.
It’s also a good idea to encourage your family members to create emergency funds for themselves as well. Being a first-generation American often means carrying the expectation that you’ll intervene financially if your parents or siblings need the help. And while it’s important to lend a hand when you can, you can still wind up stretching yourself too thin when you’re always using the money you saved to help others.
Experts typically recommend having three to six months’ worth of expenses in an emergency fund. So if all your necessary expenses for the month (like, rent, food, utilities, bills, medications, etc.) add up to $2,000, you should aim to have an emergency fund that’s around $6,000 to $12,000. It seems like a lofty number, and though it may take a while before you have a fully funded emergency savings account, the money will come in handy when you need it most.
Pro tip: Save your emergency fund in a high-yield savings account so your money can earn interest and grow a little quicker — even when you aren’t making contributions …….