Unexpected expenses can happen at any time, to any one of us. By establishing an emergency fund, you can keep a mild speed bump from becoming a financial fiasco. Here are 5 simple tips that could help you build up that reserve.
Make Saving a Part of Your Financial Routine
The best practice is to have a steady deposit into your emergency fund. It doesn’t have to be large at first. The important thing is to save something. It’s said to take 66 days on average to make something a habit. The sooner you start, and if you make it part of your routine, it will begin to come naturally.
Make it Automatic
The best way to ensure your monthly savings deposit is consistent is to make it automatic. If you get direct deposit of your paychecks, see if a percentage can be deposited directly into a savings account.
Otherwise, set up an automatic transfer every month so that a percentage of your income goes from your checking straight to savings. The idea is to move that money to the right place before you even notice it’s there, so you won’t be tempted to spend it and won’t miss it.
Don’t Put off Saving
If you’re still working on paying off credit cards or other debt, it’s tempting to wait to save until you’ve knocked out your debt. That said, set aside some small amount, even while you’re still making debt payments. Treat saving like a muscle you have to develop—make it consistent, automatic, and turn it into a habit that you’re not likely to break. Once you start paying off debts, then you can increase the amount you’re putting toward your emergency fund.
Don’t Touch the Emergency Fund
When is it appropriate to delve into your emergency fund? We say a bona fide emergency is a circumstance that prevents your ability to earn an income, or is absolutely necessary to your life, like medical expenses. Remember, emergencies should be unexpected.
Even after you reach your goal and have 3 to 9 months’ income in savings, keep saving. Now you can start setting “fun” savings’ goals. Plan for a family vacation, your next car, or any other thing you might want. You can also build toward a down payment for a home or a college fund for your kids… once you’ve established your emergency savings, then use the saving habit you’ve developed to work toward all of the things you want without having to rely on credit card debt to get them.
No matter what your financial situation, creating a sufficient emergency savings fund is absolutely essential to your financial health. It will help you become a better saver, avoid future credit card debt, and achieve true financial freedom.
Bonus Tip! Pick the Account that’s Right for You
At First Heritage Federal Credit Union we realize that everyone’s financial needs are different, which is why we offer a variety of personal savings accounts to meet those needs. Choose from our most basic account, an account that benefits from the cash rewards you earn with our Kasasa® checking account, our specific vacation and holiday accounts, and even a savings account designed for kids! It’s never too early to get into the habit of saving.
View our Checking and Savings account options.
All our savings account options offer convenient benefits while earning you interest. Whether you’re saving for your next vacation, home repairs, or your child’s college education you’ll be able to find a plan that works for you.
Sources: Credit.org; Healthline
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