Be Prepared With an Emergency Fund
Posted on July 6, 2022 at 2:12 PM by Brian Godwin
Saving money can be hard to do! Whether it is because you’re just barely making it through the month with enough to cover your expenses or because you find it hard to resist those new items sitting in the store, it seems that it is always easier for money to flow out, than in.
As difficult as it may seem, it is important for everyone to work towards an emergency fund, for those unexpected situations in life that arise from time to time. You never know when your car might break down, your home may need repairs, or you’re temporarily unable to work for a period of time.
Unfortunately, a recent survey from Bankrate.com indicates that only 44% of Americans have enough savings to cover an unplanned expense of $1,000. However, there may be ways to improve upon this.
Building an Emergency Fund
You may not have much money available after paying your obligations each month and feel as though it’s difficult to make progress, but I find it helpful to break it down into small goals. If you’re able to save just $1 every day, you’ll find yourself with $365 in savings by year end. If $1 a day is too much, try to do $5 per week. You’ll still be able to save $260 in a year’s time if you can stick with it. Keep it going for two years and that figure jumps up to $520.
Another option could be saving a bigger chunk at once. For example, if you receive a tax refund, plan to put 10% (or whatever number is appropriate for you) into savings before you spend any of it. Perhaps you get an annual bonus at work or have a period of overtime that results in a bigger check during the year. Plan to set aside a portion of those funds to help build your Emergency Fund and it won’t feel like such a pinch.
As you start to accumulate a little bit of savings, make your money work for you. Look for a higher yield account, such as a money market to earn greater dividends. You may be earning pennies at the beginning, but as your balance grows, so will the return on your investment.
I readily admit that this may be a slow process, and just when you start to make some headway, an expense may arise that wipes out your fund and knocks you back to zero. But try not to let this frustrate you. Instead, look at the positive– you were able to cover (or at least mitigate) that expense, and that’s the point of an emergency fund to begin with.
Good luck! And if there is anything we can do to help you here at River Valley Credit Union, please let us know.
What tips do you have for building an emergency fund? Comment below!