You’ve probably heard that everyone should have an emergency savings fund. But a recent survey showed that 29% of Americans have no emergency savings at all. The Federal Reserve Board found in 2015that 46% of adults didn’t have enough in savings to cover a $400 expense.
While there’s no one amount that’s ideal to save, most experts agree that you should save enough money to pay for three to six months’ expenses. This can seem like an impossible amount of money to save, but you can do it with careful planning and patience.
Why do you need an emergency fund? Because life can get expensive. You need money for unexpected expenses like a big car repair or to help tide you over if you lose your job. Put some money away regularly in an interest-bearing savings account and leave it there.
Not sure where to start? These tips can help you find that extra bit of money that you can put aside for emergencies.
Track your spending. If you don’t have a budget yet, now’s the time to make one. Write down every dollar you spend for a week, then write down all your monthly bills.
Track your income. Write down every source of income you have. Compare it to your spending. How do those two numbers match up? If you earn more than you spend, congratulations! You have margin, extra money that you can use towards savings. If not, look at how you can cut your spending or earn a little extra money.
Don’t aim too high. If you start out thinking you need to save six months’ expenses, that can seem too scary. Aim for a smaller goal first—say, $1,000 or even $500. Even $250 in savings can really help out if something unexpected happens.
Make saving a habit. How much margin do you have? You should challenge yourself to save some of every paycheck, but not enough to keep you from paying your bills. Even $10 a week can help get you on your way. And if you can manage to save $20 every week, it’ll add up to over $1,000 in savings after a year! Use online banking to send that money into your emergency fund.
Be smart with extras. Did you get a raise at work? Christmas bonus? Income tax refund? Put it away! If you were making ends meet before, don’t raise your spending to use up that new money. Put it in your emergency savings account and watch that balance grow!
There’s an app for that. Budgeting apps can be a real lifesaver for tracking your income and expenses. Money Management is a great free app that can help you manage your money.
If you’ve been feeling stressed out about money, starting an emergency fund can help you sleep easier at night. With a healthy emergency fund, you won’t have to use credit or borrow from friends or family if you have a fender bender or your refrigerator breaks down. That’s real financial freedom!
For more free tips and resources, visit our money management page.
This article should not be considered legal, tax, or financial advice. You may wish to consult a tax or financial advisor about your individual financial situation.