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How to set up an emergency fund

Emergency Fund

Not having an emergency fund is one of those things a person always plans to save for but then never does. And it is not until a financial crisis hits that they wish they had. Bankrate’s emergency fund study shows most Americans would have to take on more debt to cover a financial emergency. If your financial resolution for the new year is to build an emergency fund, then consider some options that will help you save without a huge financial impact.

 

BUILDING AN EMERGENCY FUND

 

Budget

 

If you don’t already have a budget, consider setting one up. Most budgets suggest putting some of your leftover money, usually 10 percent, into a savings account. Before you do that, reach your financial goals for your emergency fund. This doesn’t affect your budget anymore than it would for any other savings account.

 

Second Job

 

Another option to building your emergency fund is to find a side hustle. This is a great way to meet save money without disrupting your other financial goals. Some favorite side jobs are driving for Uber or Lyft, blogging, or building an online business. The best part about this option is that after you save your emergency fund, you can continue to do it if you like, and use the extra money for some of your other financial resolutions.

 

Spare Change

 

This idea to save your spare change in a jar will leave you unexpectedly surprised. Not only does it have no affect on your regular monthly financial commitments, but the change can really add up. Keep the jar in a place where everyone in the house can contribute. Once it is full, take it to the bank, put it in your account, and start again. Keep going until you’ve built the emergency fund you need. Again, once you’ve fulfilled that financial goal, keep doing this to help with any others you may have.

 

Tax Return

 

Do you receive a tax refund at the end of the year? Consider using some, if not all, to jumpstart (or even fulfill) your emergency fund. It’s “extra” money, and unless you have it earmarked, it is a great way to save for a financial emergency without having to put in the effort the methods above take. If you can’t allot the full refund to the emergency fund, do what you can. Even saving a little will give you a cushion if a financial crisis hits.

 

EMERGENCY FUND ACCOUNTS

 

Opening another account at your current financial institution might be the simplest and easiest choice. However, keep in mind it may not be the best choice. Look at the other banks in your area and see what types of high-yield savings accounts, money market accounts, and even CD accounts they offer. Choose the one that best fits your needs and offers the highest return on your investment.

Related: How to Pay Off Debt in 2020

Building an emergency fund is an important financial goal. Without one, it can cause a lot of mental and emotional stress. Choosing to take control of the matter, to make an emergency fund a financial goal, is a resolution that will eventually be rewarded. After all, eventually an unexpected expense will occur, such as a house or car repairs, or even emergency dental work. Knowing you are prepared for it will make all the difference.

 

Greta Gunselman is a personal finance freelance writer. Proud owner of a BA in English, she spends her time talking about finance over on Twitter (@thisgirlswallet) and post-military life at lifeafterthemilitary.blog. If you’d like more information about Greta’s writing, please contact her through her website, thisgirlswallet.com

 

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