Building your Emergency Fund
If we could recommend one key strategy to improve your financial situation it would be to create and use an emergency fund. This type of financial building block is important for many reasons. For starters, life is unpredictable — no matter how much we plan, unexpected expenses can always pop up. Your car could break down and require an expensive repair, your refrigerator could stop working and need to be replaced, or you could end up having to travel to help with a family emergency. There is also the chance you could be laid off or must take time off work if you become sick or injured.
If any of these situations (and there are literally thousands of possible scenarios) occur, you could end up having to scramble for find money to cover the costs involved. Some people turn to payday loans, others to other types of high interest debt. This can result in serious debt problems that can take years to resolve and cause incredible stress and anxiety.
That is where having an emergency fund can be a lifesaver. It can help you deal with almost any type of unexpected expenditure, without having to borrow more money to cover an emergency expenditure. And it does not have to be arduous or painful to start one.
Here are some ways in which you can easily implement (and then build up) your emergency fund:
How To Get Started
Any bank or credit union will allow you to open a simple savings account, especially if you already have a chequing account with them. Sometimes opening a new savings account is just a matter of few minutes, and you can do it from the banking mobile app on your phone. You can often give the new account a name, such as “emergency fund” so you will remember what it is for. Set a goal to put $100 into your emergency fund each month, for example, as that might be a reachable goal for you. Some people start with $50 from every paycheque into their emergency fund. And to be honest? Most of the time, they do not even notice the money is missing from their chequing account. It is handled automatically by the bank, and it is an effortless way to build up that fund.
You will want to have a category in your budget for emergency savings and make sure you “pay” this expense every month, just like you would with any other bill. This will get you into the habit of saving and help your fund grow over time.
Use a Separate Account
You might be tempted to just keep these extra funds in your main account, but we would strongly caution against that strategy. You may forget that the funds are to be saved and could easily end up spending the money. By stashing your extra cash in a separate account, you will be prevented from being tempted to dip into it to make ends meet. Your emergency fund should be for emergencies only.
You can also consider multiple emergency fund savings account, each of them with a different name.
Automation Is The Secret Sauce
As mentioned earlier, you can set up an automatic transfer to move money from your main chequing account to your emergency savings account on a set schedule. Most banks make this easy to do using their handy phone app.
Saving this way can be a great idea since it happens automatically and does not require you to do anything to make it happen. Plus, once you have the automated transfer set up you are not likely to even notice the money moving over after a brief while. Using this strategy, you can slowly build up your emergency fund over a period of time without paying too much attention to the process. It is a low-stress way to grow your savings!
Stash Any Extra Dough in your Emergency Fund
There is no better feeling then getting a juicy tax refund, some birthday money or even a bonus at work. To build up your emergency fund even faster, stash this extra cash in your emergency fund. Since this is (theoretically) “extra” money that you did not account for in your budget, you will still be able to afford your expenses and grow your emergency fund at the same time.
So, log in to your online bank and get that emergency fund set up today! You will not regret it.
And if you are feeling like your debts are careening out of control and you need some help resolving them, please CLICK ON THE FREE CONSULTATION bar, below, or click on the telephone icon to book a no-obligation appointment with one of our Farber professional team members today. We are here to advise you – and to help!