We all experience financial emergencies, like car repairs, medical bills, home repairs, or the many other financial surprises life throws your way like job loss. The Covid-19 crisis has not only left many people uprooted and confused about what to do next, it also taught many a valuable lesson about the importance of physical and financial health.
Whether you must make up for lost income, cover a surprise bill, or just want a better way to save for your future, you’ll be glad to have followed one or more of these strategies to build an emergency fund.
Even if you currently have nothing set aside for a rainy day, it’s as easy as starting with a few dollars a day.
Knowing where your finances stand can help you determine how much you should save for your emergency fund. The amount you need depends on your situation. A best practice is to calculate your monthly expenses for necessities (water, utilities, housing, groceries, etc) and determine how much you should set aside to cover yourself for three to six months during an emergency. Doing this gives you an idea of how much you need to save.
It’s important to know where your money is going so you can find savings opportunities. Budgeting allows you to maximize income and find ways to reduce or manage your spending.
Building your savings account takes time and could require you to think about your spending habits. The best way to free up money to build your emergency savings is with a budgeting plan. Even a few dollars a week will build over time, so you won’t be unprepared when something unexpected comes your way. If you aren’t sure where to begin, we offer free online and in-person webinars on budgeting led by our associates to help give you the tools and confidence to invest in you.
Setting goals each month will help you get into the habit of setting aside funds regularly. One way to do this is by setting up automatic transfers into a savings account each time you get paid.
Putting your hard-earned money into savings is great, but you also want to make sure that it’s in an account that will maximize your dollar. Make sure you look for accounts that have competitive interest rates.
Creating a system allows you to be consistent. You don’t have to start with a substantial number, however, when you choose the amount you want to save, stick with it. If you can afford to add more occasionally, then it will help your funds grow faster.
The financial uncertainty that came during the early days of the COVID-19 pandemic showed many how important a healthy emergency savings fund is. While global pandemics are rare, losing your job, illness, car trouble, and other unexpected costs are not. Your emergency fund is your insurance against the unknown. A great target for your emergency fund is 3-6 months of expenses, but it’ll take time to save that much. A goal to get started is $500. You may have some money left over from the stimulus payments or from not being able to get out as much as you used to. These funds are a great chance to start your savings account. If your money is a bit tighter, you can look at areas you can reduce spending or use some of the simple strategies below.
Building up your emergency fund doesn’t mean you need to be a frugal spender and a savvy saver. When you get $1 and $5 after breaking a $20, put it in a jar, or ‘piggy’ bank you have at home. When the jar fills up, move it into the account you have set aside for your emergency fund.
If you don’t carry cash, you can try mobile savings apps that make automatic transfers based on your anticipated transactions. Some banks have cash back rewards for purchases to certain restaurants and stores. Instead of spending them, add them to your savings to increase your savings rate.
When you’ve reached your max for what you can save and need opportunities to set aside more, finding a side hustle is a great option to earn additional income. By taking advantage of a side hustle, you can put the money you make into your emergency fund.
It’s easy to start building your emergency fund, but to continue to do consistently is the hard part, so start small and aim high.
Be sure to regularly check your emergency fund. This can mean getting balance notifications sent to your email or phone or using online banking or our mobile app. Monitoring your progress can encourage you to keep going and stick with those healthy habits.
Don’t miss the opportunity to recognize your accomplishments. You can find new ways to treat yourself, and once you’ve reached your goal of 3-6 months, set another one.
When you are saving, make sure you draw a line between your emergency fund and everything else. Once you’ve reached your goal, it’s a good idea to start another savings account to stay on track for an even better financial outlook.
Everyone needs to save for the unexpected and having an emergency fund can mean the difference in weathering the storm versus going deep into debt. It’s never just about how much you make, but how much you can set aside.
The information on this page is accurate as of August 2021 and is subject to change. First Financial Bank is not affiliated with any third-parties or third-party websites mentioned above. Any reference to any person, organization, activity, product, and/or service does not constitute or imply an endorsement. By clicking on a third-party link, you acknowledge you are leaving bankatfirst.com. First Financial Bank is not responsible for the content or security of any linked web page. Member FDIC / Equal Housing Lender.
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