3 Steps to Starting an Emergency Fund

June 6, 2019

When emergencies strike, are you prepared? Can you cover the expenses that life unexpectedly might throw at you? It is always a good idea to start saving for emergencies if you haven’t started already.  Here are some steps to follow when getting started.
Step 1:
Open an alternate savings account that is easy to access. Refrain from putting your money into a Certificate of Deposit (CD) or Individual Retirement Account (IRA) which has a minimum amount of time that the money must stay in the account, during which you cannot access the funds. Consider opening a high-yield savings account because it’s easy to access and earns you dividends. 

Step 2:
Set a savings goal. A good rule to follow is to have between three and six months worth of living expenses saved. When starting an emergency savings account, start with a small amount (like $500) but don’t stop there. Look at your monthly income and make it a goal to put away a certain amount each month. Over time your emergency fund will grow. 
Remember, the main goal of having an emergency fund is to only tap into it for expenses that relate to unexpected emergencies. Some examples are:
Major car fixes 
Home/appliance repairs
Hospital trips
Unexpected unemployment 

Step 3:
Begin saving! Here are some extra ways you can save:  
Do-it-yourself. Brew your coffee at home instead of going to a coffee shop. On average it could save you $800 a year!
Automate your savings. Set up your account so that a portion of your paycheck is directly deposited into your savings. Aim to save 20% each payday.
Spare Change Challenge. Along with spare change, avoid spending the $5 bills that end up in your wallet, save it instead!
Saving for emergencies is a tool that you will use for the rest of your life. Get started building your emergency fund now so you are more prepared for an unexpected situation later.

Tags: Savings, Tips and Tricks, Money Management