February 28th 2017 by Amanda Perkins
We all know that life is full of the unexpected and things often happen when we are completely unprepared, often financially. We all know it’s important to have an emergency fund for these occasions but also know how hard this is to actually do. Between saving for retirement, paying bills, caring for a family and all of life’s other expenses, saving for the unknown can sometimes be hard. The unknown could be the loss of a job, a major car repair, medical bills, or some other small emergency. What is important to know is having that emergency fund saved and waiting saves you having to put life’s surprise expenses on a credit card!
A good rule of thumb is to have 3-6 months of expenses covered in your emergency fund. Even a savings of $1000 is a great start and can cover you for many minor emergencies that arise. Your best plan is to set yourself a goal of how much you would like to have set aside and then budget for that in your monthly expenses.
Don’t forget to put that money somewhere you will not be tempted to touch it. Either remove access to it from your debit card, put it into a limited access savings account, or consider opening a separate savings account altogether.
Find ways to earn a bit of extra money, helping build up your emergency fund quicker. You could sell off things in your house you no longer need or use, pick up a part-time job, talking to your boss about a raise or start a small at home business.
Remember to always keep in mind the point of the emergency fund. Be realistic of what is it there for and what you should consider an “emergency”. Using the funds to pay off a credit card because you spent too much at Christmas may not be considered an emergency. Think about the bigger surprise expenses like loss of a job, major home and auto repair that will need fixing right away. Setting yourself a budget for your daily and monthly expenses is important not only to help you plan for specific expected events but also for the unexpected!
Talk to us about setting up an emergency saving fund through automatic transfer - because your future self will thank you!