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Having an emergency savings fund can save you from significant financial hardship.
[ctt template=”8″ link=”Q2Ozl” via=”no” ]“… for money to save you, first, you must save it.” – Kevin O’Leary of Shark Tank[/ctt]Financial experts agree and recommend that consumers should work to have three to six months of living expenses saved for emergencies, in addition to long-term savings. Three to six months of monthly expenses saved may seem like a significant and unattainable amount, but it is possible. Here are 6 Easy Emergency Savings Set Up Tips.
Make a Commitment.
One of the hardest part of saving is not the act of saving, rather, it is making the conscious commitment to save on a consistent basis. Making a commitment to save is the first step in establishing an emergency savings account. Once you are mentally ready to save, the act of saving will become easier. Start by taking this Pledge to Save by America Saves.
Determine how much is needed.
Simply add up all of your monthly expenses and multiply that amount by the number of months (ex. three or six months). This will tell you what your emergency savings goal should be. You can also use this Emergency Savings Calculator to determine how much you should save. Knowing the amount needed for your emergency savings fund is the first and most important step.
Take baby steps.
The total emergency savings amount may seem big and intimidating, but don’t let that number discourage you from saving. “How do you eat an elephant?” The answer of “One bite at a time” applies to saving as well. Break your big emergency savings goal into realistic and reasonable bite size goals.
For example, if your total emergency savings goal amount is $10,000, break that goal into smaller goals of $2,500 per year over four years. This makes that big intimidating goal into a SMART (Small, Meaningful, Achievable, Repetitive, and Trackable) Saving Goal.
Automate your savings.
The easiest way to stay on track with your emergency savings goal is to automate your saving. Set up direct deposit of a percentage of your paycheck or a specific amount per pay period into a savings account.
[ctt template=”8″ link=”2bmMN” via=”no” ]Automating your savings will help make your saving repetitive and consistent.[/ctt]Make emergency savings account inconvenient to access.
Avoid having your emergency savings account at the same financial institution where you have your checking account. Open a savings account at another bank or credit union that you cannot easily access into but is accessible when necessary and needed.
Also, avoid getting an ATM or debit card for that account to eliminate the temptation of tapping into it.
Don’t tap that asset!
Sometimes, unexpected expenses or shopping temptations happen. However, not all unexpected expenses are emergencies. Avoid using your emergency savings account as an overdraft account when you do not have enough money in your checking account.
[ctt template=”8″ link=”YbMse” via=”no” ]Reverence your emergency savings account and protect it so that it will be enough when a true emergency arise.[/ctt]Building a true emergency savings fund takes time, persistence and consistency. It will not happen overnight or even over a year, but it will happen if you stay the course. Establishing and growing your emergency savings fund can be achievable and fun when you use these six easy emergency savings set up tips.
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