Life has a way of keeping you on your toes – and that’s true when it comes to finances as well. Setting up an emergency fund can turn a devastating financial hit into a minor inconvenience.
If you’re starting at square one without any savings in place, a good way to start is a small monthly contribution. Even as little as $25 per month can add up. When you put those dollars into a high interest earnings account (as discussed here), your contributions will continue to compound and you’ll see your progress begin to take shape. Setting up an automatic monthly transfer can be a great way to get started and make sure you don’t skip a month of contributions. After you get comfortable with regular contributions, re-evaluate and see if you can increase your contributions. Every little bit helps in reaching your goal.
Want to jumpstart those savings? Maybe it’s time to “Marie Kondo” your life! There are a plethora of sites where people buy and sell used items successfully, and much more easily than the days of Ebay only options. From Facebook Marketplace, to my personal fave – Poshmark! Take your earnings and start your emergency fund.
How much should I save?
A great goal to work towards is a savings that can last you for three months. This acts as a buffer should you have a temporary loss of income, with some time to get back on your feet.
Where should you open your emergency fund?
It’s important for your savings to be available, but not too available. You don’t want to be tempted to dip into it for just anything. I find it helpful to have your emergency fund in an entirely different bank than your regular checking and savings accounts, giving it a degree of separation both mentally and physically.
What constitutes an emergency that calls for dipping into the fund?
Urgent situations that come up unexpectedly are the most justifiable reason to dip into your fund.