Savings for Emergencies. According to a recent report, almost a quarter of Americans have no emergency savings. Without an emergency fund, you can imagine that an unexpected expense could send your budget into a tailspin.
With credit card debt at an all-time high and no significant savings for many Americans, it’s important to learn how to get started and grow your emergency savings. [Ii] YOU CAN do this!
4 tips to build your emergency fund
1. Where to keep your emergency fund
Keeping the money in the cookie jar might not be the best plan. Mattresses don’t work that well, either. But you also don’t want your emergency fund to be “mixed up” with the money in your checking or savings account. The goal is to keep your emergency fund separate, clearly defined, and easily accessible. Setting up a designated high-yield savings account is a good option that can give you quick access to your money and keep it separate from your main bank accounts. [Iii]
2. Set a monthly goal for savings
Set a monthly goal for your emergency fund savings, but also make sure you keep your savings goal realistic. If you choose too ambitious a goal, you are less likely to achieve that goal consistently, which could make the process of building your emergency fund a frustrating experience. (Your emergency fund is supposed to help reduce stress, not increase it!) It’s okay to start by saving a small amount until you have a better understanding of how much you can actually “save” to save each month. Plus, once you’ve set up your high-yield savings account, you can automatically transfer funds to your savings account each time you receive a payment. One less thing to worry about!
3. Spare change can add up quickly
The convenience of debit and credit cards means we use less cash these days, but if and when you pay with cash, take the change and put it aside. When you have enough change to be meaningful, maybe $ 20 to $ 30, put it into your emergency fund. If the majority of your transactions are digital, mobile apps like Qapital allow you to set rules to automate your savings. [Iv]
4. Know your budget
Making and maintaining a budget may not always be the most enjoyable hobby. But once you’ve set it up and it’s been sticking around for a few months, you’ll get an idea of where your money is going and what better way to control it. We hope this motivates you to keep going and keep working towards your bigger goals. When you start, take out your bank statements and write down recurring expenses or types of expenses that occur frequently. Odds are pretty good that you will find some expenses that are not strictly necessary. Find ways to moderate your luxury spending without taking all the fun out of life. By moderating your spending and eliminating really useless indulgences, you will probably find money to spend each month and be on the right track to building your emergency fund.