Even the most balanced of budgets can be derailed when the unexpected happens. An emergency fund can provide some financial cushion in the event your car needs unanticipated repairs or your dog needs emergency surgery. Not only can an emergency fund get you out of a bind, but you won’t have to rely on credit cards or loans that just rack up more debt. Here’s what you need to know about saving for an emergency fund.
How Much You Should Have in Your Emergency Fund
The ideal amount needed for an emergency fund depends on your financial situation, including income and monthly expenses. Financial experts agree that an emergency fund should have enough to cover three to six months of living expenses. If you unexpectedly lost your job, you’d have a way to pay your rent, auto loan, and other monthly expenses until you found a new job. If you or an immediate family member became terminally ill or seriously injured, the funds in your emergency account could help cover mounting medical bills.
How to Save for Your Emergency Fund
Saving such a large amount can feel daunting, or maybe even impossible, especially if you’re living paycheck to paycheck. The best way to start saving for your emergency fund is to start small. Begin with a savings goal of $500. Once you reach $500, double it to $1000. Continue setting attainable goals to slowly build up your emergency fund.
If you’re having a hard time finding extra funds in your budget to allocate to your savings, it’s time to take a closer look. Examine your monthly bank statements to see where you’re unnecessarily overspending, and make cuts where you can. Bring your lunch from home instead of eating out each day, and you can allocate $10 a day to your emergency fund. Skipping your bi-monthly trip to the nail salon could allow you to save $100 a month. There are plenty of ways to save for your emergency fund if you know where to look.
Where to Keep Your Emergency Fund
It’s not a good idea to leave large amounts of cash hidden all over your home. Your money is most protected in a savings account. It’s wise to keep your emergency funds in an account separate from your everyday checking. You’re less likely to dip into your savings account if it isn’t attached to your checking account. A separate savings account will still allow you quick access to your funds in event of an emergency. Don’t forget, in a savings account, the money has the potential to earn interest and is federally insured up to $250,000.
We can never be fully prepared for the unpleasant curveballs life throws at us, but we can soften the financial blow. Our membership savings account and money market account are the perfect tools to help you build your financial safety net. Let’s start saving for your emergency fund together.