What’s one of the best ways to maintain peace of mind with your finances? An emergency savings fund. Whether you are faced with a medical emergency, job loss, or a major car repair, an emergency savings fund is the only way to avoid the stress and debt from these unexpected situations. While beginning to save for your emergency fund might be overwhelming, consider the following tips to build your savings.
Set a goal
One of the first steps to take when saving for your emergency fund is to set a realistic goal. In order to set your goal, use an emergency savings calculator to figure out how much you should aim to save. Generally, a good rule of thumb is to set a goal of about 3-6 months of expenses to live off of in case of an emergency.
Make sure the goal you set is within reach. If you set a goal that is too ambitious and you start to fail at your plan, you’ll feel less motivated to keep trying. By using a savings calculator to set realistic monthly goals and milestones, you’ll feel more motivated to keep saving once you reach those goals.
Use a separate high-yield savings account
In order to prevent yourself from withdrawing or transferring money regularly, it’s a smart choice to keep your emergency savings in its own separate account, preferably one with a great interest rate. Having a separate emergency savings account helps you to easily measure and track your savings growth. Just make sure to chose an account that is accessible in case you suddenly need access to your savings.
To make the most of your earnings, update all of your financial accounts to ones that offer the lowest fees and interest rates. For example, update your credit card to a low-interest, no-fee card.
Save your tax refund
Instead of using a tax refund for a vacation, electronics, or clothing, put your tax refund directly into your emergency savings. While it can be tempting to use this additional cash towards travel or eating out, you’ll thank yourself later if you put it directly into savings. Put other additional cash that you receive, such as a holiday bonus or a gift, directly into an emergency before you are tempted to spend it.
Cancel what you don’t use
One easy way to contribute to your emergency savings is to cut down on the items that require a monthly payment but that you don’t use regularly. This includes your home phone, premium cable package, or a movie streaming service that you don’t use frequently. If it’s not something that you’ll miss on a daily basis, consider canceling or downgrading your plan.
In addition, consider canceling or shopping for cheaper alternatives to memberships and clubs that you are not taking full advantage of, such as a gym membership or professional club. Don’t forget to put what you save on a monthly basis directly into your emergency fund.
Even if you start off small, once you start building your savings, you’ll find yourself with greater peace of mind in case an emergency situation arises. If you’re interested in learning more about managing your money and growing your savings for long-term financial success, check out the online resources at WMFCU’s online Financial Education Center.