Fewer than 4 in 10 Americans have enough cash on hand to cover even an unexpected expense of $ 1,000, like an emergency room trip or car repair, according to a national survey by Bankrate. Even fewer saved months of spending.
This is why an emergency fund is so important. This is your own personal insurance policy for financial emergencies, with savings held in a separate account exclusively for emergencies.
Your emergency fund savings goal depends a lot on your income and expenses. Most experts suggest that an emergency fund should have at least three to six months of living expenses. This would include anything you might need to pay for the mortgage or rent, utilities, food, debt and loan payments, insurance payments, education fees, transportation and transportation. other monthly personal expenses and activities.
The more you earn, the more you have to set aside. If you have a family to support, consider that when determining your savings goal. If you can increase your emergency savings beyond six months of spending, you’ll be even better prepared. It’s a good idea if you work in an industry where layoffs are frequent, or if you don’t have a steady income. You should also aim for a higher amount if you or someone in your household has a chronic illness that may require additional medical attention or more frequent medical visits.
Here are 3 easy steps to building an emergency fund
1. Determine your financial goal for emergency funds. Adjust your goal if your situation changes.
2. Decide how much you can save each month based on your budget.
3. Open and set up automatic deposits into a dedicated emergency fund savings account each month.
For a successful and sustainable emergency fund, it is essential to replenish your account if you have used it. If you have had unexpected and expensive home repairs that eat into your fund, you need to replace the money to bring the account back to your goal amount. Once you’ve reached your emergency savings goal, you can stop saving for this account and feel confident that you have a safety net.
Saving for an emergency when you’re on a tight budget or living paycheck to paycheque can seem impossible. While you might only have a small amount to contribute each month and the task might seem daunting, you will be working towards your goal of safety in an emergency. Benchmark Federal Credit Union offers many savings options for your emergency fund needs, from basic savings to high yield accounts and money market accounts. To view these and other savings products offered by Benchmark FCU, visit BenchmarkFCU.org. If possible, emergency savings are best placed in an interest-bearing account that can be easily accessed without any penalties.