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Life is full of surprises, and not all of them are welcome. From unexpected medical bills and car repairs to sudden job loss, having an emergency fund means you’re prepared for these typically stressful events. Think of it as your financial safety net. Plus, knowing you have money set aside can reduce stress and anxiety, letting you focus on your next steps.
How to start building an emergency fund
Set a goal: Decide how much you need in your emergency fund. A good rule of thumb is to save a couple of months’ worth of living expenses. This amount will vary based on your personal circumstances, such as your income and monthly expenses.
Tip: Start small, if the goal of saving several months’ worth of expenses seems daunting, start with a smaller, more achievable goal, like saving $500 or $1,000. Then increase your savings goal as your savings grow.
Create a budget: Start a monthly budget to track your income and expenses. Look for areas where you can cut back and allocate a portion of your income toward your emergency fund. Not sure where to start with your budget? Check out Master your Monthly Budget on how to get started.
Automate your savings: Set up an automatic transfer to your savings account and give it a nickname like “Safety Net” or “Life Happens”. By automating your savings, you’re more likely to consistently contribute to your emergency fund without having to think about it.
Tip: Review your spending habits and identify non-essential expenses you can get rid of or reduce. Redirect these funds into your emergency savings.
Easy access: Your emergency fund should be easily accessible in case of an emergency. Consider keeping it in a savings account that offers easy access so you can get to the funds when you need them most.
Replenish after use: If you need to dip into your emergency fund, make it a priority to replenish it as soon as possible and continue rebuilding it for the future.
Setting up an emergency fund is seriously easy and incredibly important for when things get serious. Future you will thank you for taking this smart step. By starting with a goal and automating your savings, you’ll have peace of mind knowing you’re prepared for whatever life throws your way.
Start building your emergency fund and open a Reward Saver account at Hume Bank, deposit $25, and we’ll add $25 FREE to get you started. Start small, and watch your savings grow.