If you haven’t already opened an emergency fund then now is the right time to do so. This rainy day stash is all you need meet the requirement of an emergency situation, such as expensive medical procedure, financial crisis, or major home or auto repair.
Having an emergency fund provides you a cushion against the unexpected expenses that life may throw at you.
How having an emergency fund helps?
A lot of people ask that they already have saving accounts where they save money for various things. Why do they need another saving fund?
The regular savings is for things that you may buy in the future or spend it on things that you have been planning to buy. An emergency fund covers you when you need a huge amount for unexpected events. Suppose you lose your job, your saving account will not be enough to cover the huge expenses like the rent, paying off the loans or something more serious like a medical emergency. This is where your emergency saving fund comes to your rescue.
How much do you need to save?
Like every other saving account, your emergency fund too should be based on your financial situation. A good rule of thumb is to save enough for most of the emergency situations. Having a $500 emergency stash is enough to meet a number of financial emergencies.
But, you can also try putting up together a $1000 fund which will be a very comfortable amount for emergency situations. Start small and build up your fund so that you don’t feel pressurized.
What Kind of Account do you need to put your emergency money?
The first thing you need to know about the emergency fund is that you cannot touch it like your current account. It should be separated from your regular saving funds. The best thing to do is to look for high yielding saving account.
This kind of saving account provides more interest on your saved money and you can quickly withdraw it in the time of the need. The interest you earn with it will add up to your saved money.
Best ways to save for the Emergency Situations
When it comes to building up an emergency fund there are plenty of ways you can do it. There are simpler and more practical ways to do so. You don’t have to add a large sum at the beginning. Start small and slowly build up your fund.
Here are some of the best ways you can save money for your emergency savings fund:
Set a goal:
Setting a goal helps you to stay motivated and focussed. You can start with a small amount a month like $50. Or you can choose any amount you are comfortable with.
Save the change:
Like good old days, you can save some loose change in your jar. Slowly this will build up and you can save that money to your emergency saving fund.
Use gift cards, coupons, and other discount offers:
Use them to buy things online or from the store and save your actual money on your buying. Use the saved money for your emergency fund.
You can cut down on some expenses and save that money for your fund. Make a list of things you spend money on and look for expenses which aren’t necessary like that gym membership or magazine or a TV subscription.
Make Extra Cash by Selling:
Try using websites like eBay to sell your old things and earn some extra money. Surely you have that old phone, CDs and DVDs, Videos Games and other stuff that you don’t use. Sell them or barter them to buy new things to save money for your fund.
You can save plenty of money by not spending them on things like gifts and small repair work. You can try DIYs for making gifts or fixing that doorknob on your own and save money for your emergency fund.
You can use your tax refund money for the emergency fund. If you get a refund that means you paid more. The next time you get the refund use that money to be deposited in your account.
Freelance or take up the second job:
You can do some freelancing work to earn some extra money. You can also opt for a not-so-time-taking second job like babysitting to earn some extra cash. The best thing about these jobs is that you don’t have to stick to a schedule. You can choose to work anytime you want.
Don’t build up a debt:
Make sure that you don’t have huge credit debt or loans in your name. Try taking care of the debts and make them manageable so that you can save more for your emergency fund.
An emergency fund is very important for people from all walks of life. You never know when life could throw a challenge. The fund will help you get through the emergency situations. These easy-to-follow saving tips will help you build a comfortable amount for emergency situations over time.