No matter how much we prepare for potential setbacks, the unexpected can always happen. Your car can break down, your roof could start leaking, or you could be facing unemployment.
If you think about your financial picture, do you have enough to cover (or at least offset) any unforeseen costs? If your answer is no right off the bat, then establishing an emergency fund should be a priority.
What is an emergency fund?
An emergency fund is a liquid savings account with money set aside just in case something financially unexpected occurs.
How much should I save?
The answer depends on your financial situation, but as a rule of thumb, it’s a good idea to have up to six months of living expenses saved. You’ll want to be able to cover rent or mortgage, utilities, transportation, food, insurance and any other regular expenses you may have.
How do I start?
The idea of saving up that amount of money may seem daunting, but it doesn’t have to be! Any amount you can contribute is a good start, even if you can only save $20 dollars a week.
Here are a few quick tips that can help you get started:
- Set a monthly savings goal. Making a goal for yourself helps manage your expectations. Sit down and figure out what your expenses are, where you can cut back, and how much you can reasonably afford to put away.
- Make it automatic. By setting automatic transfers to your savings account, you’ll start saving without even thinking about it.
- Save your savings. If you brew your own coffee in the morning instead of stopping at your local shop, it may seem easier to spend that money you saved on something like going out to lunch. Instead of spending those savings, no matter how small they may seem, put them into your emergency fund.
Regardless of how you choose to build your emergency fund, the most important thing is that you start. You’ll have peace of mind knowing that you’re helping yourself later!
Start your emergency fund by opening up an additional savings account today!