How Much is Enough to Put Away in an Emergency Savings Fund?
May 22, 2020
Life doesn’t always go as planned and sometimes things come up that we weren’t expecting, such as car or home repairs, medical emergencies, or sudden job loss. Just imagine how much easier and less stressful it would be to know that you were ready and able to handle these unexpected financial setbacks by having some extra money set aside.
What is an Emergency Savings Fund?
An emergency savings fund is simply an amount of money you’ve set aside to help you prepare for life’s unexpected financial events, such as job loss, medical or dental bills, and car or home repairs.
Why do I Need an Emergency Savings Fund?
The main reason why it’s so important to have an emergency savings fund is you just never know what’s going to happen or when it’s going to occur. No matter how organized or planned out you think your life is, it’s always wise to expect the unexpected. Those who are prepared and ready are able to react and recover in a way that won’t break the bank or set them back financially for months or even years to follow.
How Much Money Should I Save?
While there is no exact set number, it’s always a good idea to try and save at least 3 to 6 months’ worth of living expenses. Should you lose your job for example, you would be able to cover your expenses while you look for another job or wait for unemployment benefits to kick in. Don’t let this amount overwhelm or dissuade you. The most important thing is that you start saving, no matter how small at first with the goal of continuing to build. You may be thinking this is so unreachable, but think of tackling it in small steps. Simple changes to your daily routine can result in a small amount of savings that will build up over time. Here are some tips to help get you started.
Determine Your Personal Budget
Having a personal budget is key to financial success, not only in this instance, but for general financial well-being overall. This will help you figure out exactly where your money goes every month and help you determine how much money you have left after expenses to set aside.
Set Savings Goals and Stick to Them
Determine how much money you can set aside each month and be reasonable. Set an attainable goal to continue building up your emergency savings fund. While it may seem like the end goal is unreachable, you’ll be pleasantly surprised to see how quickly your savings can add up if you’re consistent. If your goal is reasonable, you may not even notice the money you’ve taken out of expenses to save.
Keep the Change
Whenever you get change, even if it’s a few dollar bills from breaking a larger bill, drop it in a jar at home and then move it into your savings account. If you rarely ever use cash, consider using a mobile savings app that makes automatic transfers to your savings account.
Sell Things
We all have things lying around the house that we no longer use or need. Consider selling items you no longer want and deposit the money into your emergency savings fund.
Save Your Tax Refund
You may or may not receive a yearly tax refund, but if you do receive a refund, consider depositing it into your emergency savings fund.
Adjust Your Savings
It’s important to check on your savings fund every few months to see how much money you’re saving and to determine if you can make any adjustments to save a little more. Saving money for an emergency fund doesn’t have to be painful, and you’ll still have money to do things you enjoy, but you can be saving a little money at the same time. Each deposit is one step closer to your financial goals. Contact us today for more advice on how to save money and gain control of your financial future.
By Jeff Mohlman