Saving for Emergencies
Having an emergency fund is very important because life is unpredictable. People lose jobs, cars break down, and homes require unexpected repairs and renovations. For these reasons and more, it’s important that you put some money aside for emergencies. However, not everyone does this.
A recent survey by the Canadian Payroll Association found that 47% of Canadians are saving less than 5% of their pay each month. In fact, 14% stated that they currently put aside 0% of their paycheque each month for savings. The same survey found that 24% of Canadians stated that they would be unlikely to be able to come up with $2000 in the next month if they needed to. It also found that 38% of people who are trying to save more money this year than last are unable to do so.
These statistics show that, clearly, more people need to put money aside for emergencies. But how can this be accomplished?
For some people, it may seem like saving money for emergencies is impossible. When you’re struggling to pay the bills and make ends meet, you may think that there’s no way for you to save. However, in a lot of cases, putting together an emergency fund is certainly possible if you make a few adjustments. Here are a few tips:
Put a “Savings” Category in your Budget
Assuming that you’ll put “leftover” money into your emergency savings fund isn’t realistic. If you’re sticking to your budget (and especially if you’re not sticking to it) you won’t have “extra” money sitting around for no reason.
Instead of counting on money to show up unplanned, put a “savings” category into your monthly budget. Start small and go from there. It will add up over time until you have a reasonable emergency fund.
Put Savings in a Separate Account
It’s a good idea to put your emergency savings in a separate bank account, perhaps a high interest savings account. Doing so makes it much less likely that you’ll dip into your emergency fund for something that isn’t exactly an emergency.
Make sure that you put your money in a place where you can access it if needed, however. You don’t want to lock your emergency fund in an account where you can’t quickly get to it in an emergency. Doing so would defeat the purpose of having such a fund.
Do it Automatically
Many banks allow you to save automatically. Talk to your bank and find out if there is a way to automatically transfer a certain amount from your regular account to your emergency savings account each month. This way, you won’t have to worry about remembering to save.
Some employers can even automatically put your paycheque into two different accounts as requested.
It’s nearly impossible to go over budget when you’re using cash. Whenever possible, make all purchases with cash. As an added bonus, put all of the change from your cash purchases into a jar. Once a month, take this change to the bank and deposit it. This is a great way to get some extra savings without even noticing it. However, make sure that you still stick to your budget. You don’t want to run out of money before the month ends.
Look for Places to Save
If you’re currently spending all of the money you have each month, you’ll need to look for places to cut if you want to put together an emergency fund. There are a number of ways that you can make cuts and save money. A few examples include:
- Bringing lunch instead of buying it out.
- Making coffee at home rather than going to a coffee shop.
- Cutting the channels you don’t watch out of your cable package.
- Walk, bike or use public transportation more often instead of driving.
- Buy items on sale whenever possible.
- See if you can reduce the interest rate on your credit cards and other loans.
These are just a few examples. By taking a look at how much you spend in various different categories each month, you will likely be able to find enough money in your budget to put together an emergency fund. Remember, you don’t have to start putting away a huge portion of your income all of a sudden. Start slowly and work from there.