It’s hard to predict the future, which is why it’s best to be prepared for anything. Having an emergency fund is important so you can always be prepared for the unexpected emergencies that come with life.
According to a study published by Schwab’s, only 39% of millennials have savings that will cover at least three months of necessary expenses if needed.
We think that number should be way higher! Which is why it’s a good idea to make an emergency fund one of your highest savings priorities. So, if you’re building an emergency fund from scratch, here are four tips to help you get started.
Track your monthly income and expenses
Get a piece of paper and write down how much money comes in every month and how much of that money is spent in an average month. Be sure to include reoccurring expenses like rent and any monthly bills, as well as groceries and other expenses such as entertainment costs and clothing.
Set a goal
Your emergency savings fund should cover anywhere from three to six months of living expenses. If you feel that you have a stable income or perhaps have access to different forms of credit if needed, you may be able to plan for a lower number. If you don’t have access to credit and your income is less secure, aim to save a bit more.
Choose a place to keep your emergency fund
The purpose of an emergency fund is to have quick amd easy access to cash when you need it. To accomplish this, consider keeping your emergency fund in a high-yield savings account or a regular savings account that provides some return on your deposit and where your funds can be withdrawn automatically without a penalty. Be sure to figure out how accessible your money will be in the case of an emergency.
Stick to your savings plan
Setting a goal and creating a plan to achieve that goal are important. Once you’ve created your savings plan, it’s crucial to ensure that you stick to it. This can definitely be difficult with an emergency fund or any financial goal in general. However, if your goals are realistic and attainable, it will be easier to stay on track – and meeting your goal will be much easier.
A great way to stay on track is by setting up an automatic transfer from your regular checking or savings account to an emergency fund account. Arrange a certain amount to be transferred once a month into a separate account dedicated to your emergency fund.
If you haven’t begun putting away money in your emergency fund, it’s never too late. And with the right tools, you can start your savings journey and avoid serious financial problems later. By taking these steps in creating an emergency fund, you’ll be able to have financial peace of mind in no time.