It’s really not a new idea – most of us have heard or read about the importance of having an emergency fund. We can even understand the why behind it… job loss, medical emergency, vet bills, unexpected car repairs, and the list could go on.
What can become a hurdle for many is the how. How do you begin to save? How much should you save? How can you save money when you don’t have much to set aside? We hope to answer these questions and give you the boost you need to begin saving for life’s emergencies.
- How much should you save? One of your first steps should be to determine how much you need to save. It is recommended that you save 3-6 months of income and set it aside in a dedicated emergency fund. Your eyes may pop and you may think it cannot possibly be done! Remember that building your savings is not a sprint, it’s a marathon. Set your initial goal small and attainable – start with $250, then $1,000, then 3 months of income, and finally 6 months.
- Commit to save. Once you have determined how much you need to save, commit to it. For some, you need to tell someone to help hold you accountable. Others may need to write it down and post it on your fridge or somewhere you will not forget your commitment.
- Open a dedicated savings account. Along with your commitment, open a dedicated emergency savings. Determine that this account will be used to save funds and it will not be an account used to make purchases or to transfer funds out of unless it qualifies as an emergency.
- Automate your savings. One of the best ways to honor your commitment to save is to automate your savings. If your employer offers the opportunity to direct deposit your paycheck into multiple accounts, set up a portion of the funds to be deposited into your emergency fund. Another option is to set up an automatic, recurring transfer from your Bank First checking to your savings. If you are unable to automate your savings, add it to your budget and consider it a bill to be paid.
- What really qualifies as an emergency? This is something you should predetermine. There are a few obvious circumstances mentioned above such as job loss and medical emergencies, but should a last minute birthday gift, new clothes, or a broken TV count as an emergency? Create your list and define what constitutes a true emergency situation and when it may be better to leave the funds intact and preserved for an emergency.
At Bank First, we want to provide you with the resources you need to succeed! Please reach out to your local branch if you need assistance setting up a dedicated emergency savings account.