How to Build Fund For Emergency
Having an emergency fund is important. It should be one of your top priorities so that you can rest assured that you will always have access to quick and easy money if the worst should happen or you lose your job or faced with any unexpected expenses. Building fund for emergency is a brilliant habit and it will also give you peace of mind.
How Much Should I Save?
The amount of money that you stash in your saving account every month will totally depend on your personal situation. No matter how much you save, make sure it will be enough to help you to cover your bills for at least for a few months. Your emergency fund should have at least 3-4 months' worth of income. At times you may be able to predict a forthcoming emergency, such as your car might need some repair or you may have to pay premiums. For such upcoming expenses you can start saving early so that you can be sure you have the necessary cash in hand.
How Much You Can Afford To Save?
Once you have figured out how much money you need to save every month, you should look at how much you can afford to put aside every month from your salary. Add up all the income that is coming in and then make a note of all your outgoings. It should include all your essential bills, food, and the money you spend on socializing and other additional expenditures. Check out for expenses that you can cut back and save some extra money. You might have magazine subscriptions that you never read or gym membership that you never use. You can also search for a better price for your insurances, a more competitive energy tariff or a better mobile phone contract. After you have done with all your calculations it will be easy for you to identify the amount that you can put away each month into your emergency fund. The amount you put aside should not be so challenging that you have to struggle getting through every month.
Saving is a long term process. You are not going to be able to build fund for emergency overnight. So, before you start, be prepared as it will take you several months or may be a couple of years until you have enough saving that you are happy with in your emergency account. Do not be disheartened by the time it will take you to save. Stay motivated and focused and think about how building fund for emergency will help you whenever you face any sort of unexpected expenses.
Choose The Right Type Of Saving Account
Building fund for emergency is a time taking task. You will have to save regularly. Thus, you should choose a saving account that will allow you to pay in extra money whenever you want, let you make withdrawals, allows you to manage them online or over the phone, offer a cash card and so on.
- Easy access savings accounts- Such bank accounts give you easy access to your funds. Make sure you check the terms as many banks offer only a certain number of penalty-free withdrawals per year. Also watch out for introductory bonuses.
- Notice savings accounts- These types of accounts allows you to access your money after giving a certain amount of notice, which will vary depending on the account you have.
- Regular savings accounts- This type of account will pay you high rates of interest, but you will have to make a set number of payments. There may also be other conditions such as a minimum/maximum amount you deposit every month and some may also come with penalties when you make a withdrawal.
By being mindful and disciplined you can easily build up your emergency savings. And whenever you have an emergency, you can easily use it as required. You can then replenish the funds as soon as possible. Having enough fund for emergency will give you real peace of mind.