5 Ways to Grow an Emergency Fund

Date October 31, 2016

An emergency fund is meant to protect you and your finances in extreme emergencies like job loss, sudden death of a spouse, or a catastrophic event like a flood or earthquake. Financial experts maintain that an emergency fund should be large enough to cover at least four to seven months of your current expenses—not your entire income. For some households that will be a few thousand dollars—for others over 10. But by breaking it down and taking it slow, every household size can build an appropriately sized emergency fund for their individual situation.

Figure it Out

Gather your household expenses that would have to be met during an emergency like house or rent payments, food, utilities, transportation, and insurance. Don’t include retirement savings, entertainment, gym memberships and other elective expenses that will have to be forfeited during your recovery period. When you separate these items you will get a clearer picture of the actual amount you need to set as your goal.

Save it in a Safe Place

And, that doesn’t mean cash under the bed. A separate savings or checking account at your current financial institution or a completely different location will lessen the impulse to use the money in your regular monthly budget. An online account may give you a higher yield helping you to save faster but make sure the money is accessible enough when there is an emergency. In addition to a regular savings or checking account, consider a tiered certificate or money market approach that will give you the incentive to save more, a higher return and the minimum balance requirement to help eliminate temptation.

Pretend It’s An Actual Bill

Make room for it in your monthly budget with a due date and everything. By treating it like a bill, you help establish the discipline and stick to the goal.

Real Emergencies Only

A last-minute cruise invitation or box seats for a football game aren’t emergencies. And, those onetime expenses like a tax bill or car insurance that you forgot to budget for aren’t emergencies either. Plan for them separately and leave your emergency fund.

Take it Slow

In addition to the “bill” you create to build your fund, consider adding extra money as it comes along during the year—an unexpected bonus, a tax refund, proceeds from a yard sale, even the extra change in your pocket at the end of the day or the.

With dedication and impulse control, you will build your emergency fund and achieve peace of mind knowing that you have the cushion in the event something happens in the future.

Let us know if we can help you.  Talk to our professional Member Service Representatives about savings plans and options that can help you reach your goal.

 

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