Emergency savings fund is a real lifesaver. They have saved my life countless times and I cannot afford to be less appreciative of them.
Although for starters, growing a savings account might be quite difficult (it was for me) but it takes some level of discipline and commitment to be able to save that money.
That is why it is always helpful to give oneself a target and a time frame.
Even though none of us prays for negative events to happen, we cannot rule out that fact in life. Emergencies do happen and there is nothing we can do in such cases than to rise to meet the occasion.
If we cannot, they may turn out to be embarrassing situations and none of us sure want that.
A recent study by Bankrate found that a shocking 49 percent of Americans do not currently have enough money saved to cover even three months of expenses should an emergency arise.
In addition, although only 25 percent of Americans have enough money saved to cover six months of expenses, research finds that six months of emergency savings fund is considered the minimum of what is needed to live comfortably during changing circumstances.
In today’s economic climate, Americans ideally need to save nine months to a years’ worth of expenses.
Why You Need an Emergency Fund?
It is of high importance that we have it now because emergency savings do have huge benefits when they are needed. It can save a life, reduce damages, get things done fast, and even cut costs in certain situations.
In cases of illness, loss of a job, urgent repairs, and so on, that is when we know the importance of having an emergency fund. It is important to know that emergency funds are savings and they are meant for emergencies.
Not to be used for any ‘other’ expenses and not to be lavished frivolously. It is also important to note that your emergency savings fund should be enough to cover your expenses for about six to nine months.
If that seems too challenging or quite impossible, you should try aiming for three months. It shouldn’t be less than that.
Having set that foundational knowledge, let me go on to give you how to build such a savings account.
Consider Important Expenses
It is very paramount that you consider your expenses first when considering how much you want to save. Your expenses determine how high or otherwise your emergency fund should be.
This is so that the fund can cater properly for all of your expenses. The first step we took was building up a $1,000 emergency fund. There’s a saying that goes along the lines.. “if you don’t have it, you’ll need it, if you have it, you won’t need it”.
Here is a list of some of the expenses you should consider:
1. Housing Expenses
Factor in your insurance payments in your savings fund. Auto insurance and other insurance payments have to be carefully set aside. You should be prepared for any contingencies.
If you have a vehicle, you should ensure that your emergency savings cover for your car loan, auto insurance, basic maintenance, fuel, and even emergency repairs.
Food is a basic necessity in life. Do a calculation of your monthly expense on food and include it in your emergency fund. You can save money on food by reducing the amount you spend on food.
Don’t eat out every time and find ways you can buy only the important items at low prices. Save the money you cut on these.
5. Debt Repayment
You should plan for payments on credit cards and other debt that you may owe. These debts can become a burden to you if you lose your job or face a financial challenge.
To avoid the stress of having to deal with them then, which will be more stressful, start preparing from now.
6. Personal Expenses
Expenses under this category include the things that you use personally at home. Examples are toiletries, clothes, haircut/hairdo, household supplies, etc.
These things may not look big but little drops of water, they say, make a mighty ocean. And these small things eventually count in the big picture.
Examine your monthly expenses and reserve yourself a budget for different areas such as food, entertainment, mortgage, and utilities.
Force yourself to stay within each budget and then deposit any extra money that you have leftover into your emergency savings plan.
Now that you know what you are saving for, it is time to know how exactly to build that savings plan- one that works.
7. Save — Don’t Spend –Your Tax Refund
About 75% of taxpayers received a refund last year, and the average amount was $2,913. A refund of that size can get your emergency fund off to a great start.
Open an interest-bearing savings account and have the money directly deposited into it so you won’t be tempted to use it.
Building an Emergency Savings Fund
The first thing to do now is to brainstorm and make a list of every additional income you can get. Do major thinking. Take time out to check everything and anything you can do to bring in more income.
You shouldn’t just stick to one stream of income, and it may not work well if you are trying to build a savings account.
Think of other ways in which you might generate income for yourself. That way you get some more money to save and for your expenses as well.
Here are some things that you can do to increase your income:
1. Find things that you are no longer in need of and sell them
2. Find freelance job opportunities. A lot of people make a fortune from freelancing and it works well for them. You can give it a trial as well if you feel you have what it takes to do it. A lot of companies and individuals are looking for freelancers too.
3. You can get some extra cash from reward programs too.
The Next Thing to Do is to Work Very Hard
After you have found the things you are going to do, work hard at it. You need to get to work so as to boost your emergency savings fund. Don’t just sit and expect things to sort themselves out.
Whatever you find to do, do it with all sense of seriousness and diligence. The money will not walk to you; you will have to go to it, take and do what you want with it.
The people at the top today got there by working hard. Nobody is above anyone by mistake; it takes hard work!
Building up our emergency savings fund was our 2nd step on our journey to get out of debt. As well as living a life where we weren’t fearful every month of unexpected expenses and bills.
There’s nothing more important for your peace of mind and security than to save up some money and be prepared for what might come.
Set Targets for Yourself
You should set targets or goals for yourself. Ask yourself- ‘how much do I want to save this month?’
Set limits and that that be your aim. And don’t aim for what is convenient or comfortable. But that does not mean it should be too high that you cannot afford it at all.
Dedicate a Certain Percentage of Your Income to Your Savings Account
You should learn to pay yourself first. When you get your paycheck, devote a particular amount that goes into your savings.
Preferably, you can make it automated such that it goes directly into your emergency savings account. Automatics savings helps to keep your emergency savings fund growing steadily.
Save Your Big Payments
You can as well save off your big payments. If you get a tax refund for instance, instead of spending much on extra unneeded expense, just save it away. Holiday bonuses and some allowances can also count here.
Emergency Fund Savings Printable
I came across this helpful emergency fund savings printable.
The plan has you save $2/per week throughout the first month than $5/per week, $10/per week, $15/per week, moving up to $45 per week in October and saving a grand total of $1000!
This plan will take you less than a year, in fact just 10 months. If you start this week, you can be done saving before the holidays roll around again and keep using your momentum you’ve built up to set aside for the holidays as well.
Click below to print or save this free printable to help you track your savings throughout the year and keep you on course with your goal.
52-week Money Challenge Printable-version
Keep track of the dates so you remember which week you are on and check off the column once you’ve made your contribution to savings for the week.
If you are using a binder, there is room to 3-hole punch the sheet. You can also just print the sheet and post to your bulletin board or hang on the fridge as a reminder.
Going through these steps would help you to build and grow an emergency savings fund very quickly. It is essential that you keep your savings in such a place/ account that you can have easy access to it in the case of an emergency.