Emergency Funds For Financial Safety
Having a strategy for sufficient Emergency funds for Financial Safety is of the utmost importance. update 04-19-2024
With the now Nationwide pandemic, most of us realize how important it is to have funds set aside for something as deadly health and financially wise. The pandemic has rocked this country and we do not know the full extent yet.
Having a little cash tucked away for emergencies can provide great peace of mind. If something were to go wrong, you’d have the money there as a safety net to deal with the problem.
The question is, how much should you be saving in your emergency fund? Here, you’ll discover what an emergency fund is and how to work out how much you’ll need.
What Is an Emergency Fund?
An emergency fund is a lump sum stored within a savings account. It’s there purely to pay for any emergencies that may crop up. It definitely can be from the loss of a job or the paycheck that has been terminated as it has been for millions during this pandemic. Some people have still not recovered, and it may take some time for them to do so.
These funds would come in handy for your car that just broke down, or you need to pay emergency vet fees, or you may need to repair something in the home also. An emergency fund ensures you can rectify any problems quickly, reducing stress, and providing great peace of mind.
How To Build A Financial Safety Net
How Much Should You Be Saving?
You’ll find a lot of contradicting advice relating to how much you should be saving in an emergency fund. Many experts suggest saving at least three to six months of expenses. So, if all of your bills and expenses came to $1500 per month, for example, you should save $4,500 or $9,000 respectively towards emergencies.
Of course, in this day and time, many individual’s housing is higher than $1500 a month. Rent is higher than $1500 in most major cities. So, the above is merely an example of what someone might need.
To work out how much you should save, it’s also important to take into account your family’s situation. This includes job stability, whether you rent or own your own home, and how large your family is.
Look at your emergency fund like you would with insurance. It is an investment to protect you and your family if anything goes wrong. So, committing to save as much as you can is going to ultimately protect you and the family.
The Disadvantages of Saving Too Much
While it may seem logical that the more you save in your emergency fund, the better off you will be, this isn’t always the case. Firstly, you could lose money by having it in a savings account. This is because you generally earn a small percentage (depending upon interest rates/economy) back each year on the amount you save. This doesn’t cover the inflation rises, meaning you’re losing money throughout the year.
Another downside of having too much money in an emergency savings fund is that you’ll be missing out on your other financial goals. Some of the money could be put towards your retirement, or for paying off any debt that you might have.
So, it’s important to consider your current financial position before throwing all of your savings into an emergency fund. Paying off debt could be the better option – if anything were to happen, you wouldn’t have to worry about missing debt payments on top of everything else.
Having an emergency fund is essential in today’s economy. However, it’s also important to understand how much you should be saving. The above is just a general guide on the amount of money you should aim for. If you have between three and six months’ savings to cover everything, that’s all you should need in the event of an emergency.
Easy Ways to Boost Your Emergency Savings Account
Looking for ways to increase your emergency savings fund? The more money you can save towards your emergency fund, the more prepared you’ll be to deal with the setbacks life throws at you. However, as stated above make sure you are looking at your overall financial circumstances.
Saving money isn’t always easy, especially in this economy. So, how can you save more to protect yourself when things go wrong? Here are some easy ways to boost your emergency savings account.
Make Money from the Things You Don’t Need
A good place to start to boost your emergency savings account is to sell the things you don’t need. You might just be surprised by the amount you can earn simply by having a clear-out.
There are lots of ways to sell the things you don’t need these days. As well as garage sales, you can use social media such as Facebook’s Marketplace. There are also online auction sites like eBay you can turn to.
You can sell absolutely anything, too. One person’s trash is another person’s treasure, so don’t assume something won’t sell. Go through all of your belongings and be ruthless in the things you no longer need or use.
Create a Budget
Creating your weekly, or monthly budget is a good place to start your process for your emergency funds for financial safety.
You’re also going to want to create a budget as this will allow you to see how much you can afford to save each month. Write down all of your incomings and outgoings, followed by the amount you have left.
Then, work out how much you can comfortably save each month. Once you have a figure, you can start to make saving a habit. Pay the money into your savings account before you pay any other bills. That way, you’ll be saving money without really thinking about it. You also won’t miss the amount you’ve saved if you set it to automatically go out of your account when you get paid.
Cut Back on Expenses
After you’ve created your budget, if you find you can’t afford to save anything, you can look at cutting down your expenses.
There are always things you can cut back on, whether it’s saving money on utility bills or cutting down on treats. Having a budget in place lets you see exactly where your money is going and where improvements can potentially be made. Be ruthless, too. Cut back anywhere you can while you’re trying to build up your savings account.
Pay Attention to Your Employment Benefits
A more drastic way to boost your savings would be to utilize employment benefits. If your job doesn’t currently offer much in the way of benefits, it may be time to explore your options.
If you need to change jobs and need to up your skills; you can do this online now. Do not limit yourself because of the needed education, skills, or experience. There are many ways to explore other career options online.
If you can gain employment with a company that offers health insurance and retirement savings plans, for example, you won’t have to pay for these yourself. You can then use the money you’re saving to put into your emergency fund.
Having an emergency fund is essential, but it isn’t always easy to save a regular amount. The above tips will help you to give your emergency savings a boost without negatively impacting your finances.
