What is an Emergency Fund Savings Account?
Life is full of unexpected twists and turns, and although you can’t be fully prepared for every situation, it’s important to have a backup plan you can rely on. That’s where an emergency fund savings account comes into play. It works as your financial safety net to help you get through an unexpected hardship — anything as serious as an illness or temporary job loss, to something as minor as a repairing your dishwasher or buying new tires for your car.
The goal of this emergency fund is to give you access to the money you need to move through the emergency or unexpected expense with ease. It not only helps relieve the financial burden, but just having this account gives you peace of mind. It’s a great layer of proactive protection for what matters most in your life.
Don’t have one set up? Here’s how to start an emergency fund savings account.
Take your time. Ideally an emergency fund should contain enough financial savings to cover your major expenses for six to nine months. If you’re just starting a savings account and that amount seems challenging, that’s okay. Even that first dollar you put aside is a step in the right direction! Take your time and be proud of the efforts you’re making.
List your expenses. Look at your regular fixed and fluctuating expenses and estimate how much you spend monthly. This gives you a target amount of savings for your emergency fund. Things to consider: housing, utilities, food, transportation, insurance and personal debts.
Pay yourself first. This piece of advice is one you’ll hear a lot when doing financial planning, mainly because it’s a great tip and you deserve it! You should always come first and putting money aside for your future goals should be one of the foremost things you do when you get each paycheck. If you can, arrange to have money automatically transferred into a savings account so you’re not even tempted to use it elsewhere.
Get creative. In addition to regular contributions from your paycheck, start thinking of creative ways to save money. Can you cut back on your entertainment expenses? Do you have things you never use that you can sell? Are you shopping for deals and using coupons? Stretch your imagination and watch your bank account grow.
Talk to your banker. Talk to your banker to find out what type of savings account is best suited to your needs. You’ll want to discuss any interest you can earn and how easy it is to access your money when an emergency arises.
The best news is that you’re protecting your goals by being proactive. Slowly building an emergency savings account is a solid investment in your future!
The information in this article is for informational purposes only. It should not be considered legal or financial advice. You should consult with an attorney or other professional to determine what may be best for your individual needs.