4 Tips For Starting An Emergency Savings Fund
No matter how meticulous you plan, unexpected situations are bound to happen. Therefore, you want to be financially ready to face these events. For instance, a hospital bill or a leak in your roof can cause frustration if you don’t have extra money available. This is why an emergency fund is essential. By saving for an emergency, you create a cushion to fall back on until you can stand on your feet again. While it can take time and dedication to set up an emergency fund, it is worth it. If you have been wondering how to set one up, here are four steps worth considering.
- Start small
Before setting up your emergency savings fund, you must create a budget. This will give you a fair idea of your current expenses and help to cut back so you can start saving. Many financial advisers recommend starting with a small amount of money. It might be better to start gradually than to go in with a large amount and stress over your finances. Think of one thing you will need to cut off to build your fund: your morning coffee or weekend sprees. This way, you can save three to six months of funds to support your living expenses when needed.
- Automate your deposits
It would be best to have a specific account for your emergency savings. It will keep you from making unnecessary transfers. Automate your deposits into your account through online help or visit your bank for assistance. This will make payment easier and more consistent. It will also help you deal with the temptation to spend the money or postpone payment. You can set up your deductions daily, weekly, or monthly depending on your income stream.
- Find ways to save more
Whatever monetary goal you have set for yourself within a period, you might need a push to achieve that goal. You can do this by reviewing your budget and looking for things you can reasonably cut off. Consider cutting back on your monthly subscriptions. You can also create another income stream to bring in extra cash. Whether you get a part-time job, do menial jobs, or freelance in your expertise, you can put the money you earn straight into your fund. This will accelerate your savings.
- Keep it accessible
You cannot tell when an emergency expense or situation might pop up, so it is best to ensure your savings account is easily accessible. Though the easy accessibility might tempt you to dip into your savings, you can adopt a “start it and forget it” mindset to help you resist the urge. You can open a high-yield savings or money market account to receive a higher interest rate and boost your savings. So feel free to consider this.
It is essential to have an ultimate goal to avoid over-saving. Instead of spending too much time-saving in your emergency fund, keep your money in an account that grows on its own.