One of the best things you can do to support your financial health is to create an emergency fund. This fund can be used in case of a medical emergency, a sudden visit to the veterinarian, a home repair, or other unexpected costs that could lead you to take out a small high-interest loan to cover the emergency.
Eventually, it can also be a way to cover your expenses if you lose your job.
These kinds of incidents, both large and small, put people into debt and their finances in a tangle for years.
By building an emergency fund, you develop a financial safety net for yourself.
Many people see the suggestion of saving for six months of expenses and feel that goal is far out of reach; they don’t even want to try. This is a big mistake. If you’re in that situation, first focus on building a small emergency fund of five hundred to fifteen hundred dollars. If this takes you a little time, it’s still worth having. Having a thousand dollars at your back can keep your finances well in hand on a tight budget.
How do people save a sizable emergency fund on any budget?
Open a High Yield Savings Account
Your emergency fund should be accessible, so you don’t want this invested in a 401k or stocks. Put this somewhere it can accrue the most interest and still be at the ready.
Use An App For Automatic Savings
There are many apps that can help you automate your savings in various ways, so it happens without you having to think about it. This makes building an emergency savings something you never have to consider again.
Some people prefer to have a specific amount taken from every paycheck that comes in; others like to round up their purchases. Choose a path that works for your goals.
Prioritize Your Emergency Savings
Keep your emergency savings in that separate account. Never mix it with your vacation savings fund or anything else. You don’t want this money to go toward other things on a whim.
Save At Least Half of Your Tax Refund
Your emergency fund can get a big boost when you earn a bonus during the holiday season or receive your tax refund. Put away at least half of this money to help your savings grow.