Have you ever had your laptop crash right before a big project was due? Life is full of unexpected surprises, some not so pleasant. When life happens an emergency fund is there to help you out. It is a fund that is set aside for those “oh, no!” moments, so you don’t have to put additional expenses on your credit card.

Building an emergency fund isn’t as hard as you may think. Experts suggest saving three to six months’ worth of expenses. When you first set out to build an emergency fund you should start small and set realistic goals. Make it easy by setting up automatic transfers from your paycheck or checking account.

What Exactly is an Emergency Fund?
Emergency funds give you financial stability and peace of mind because you now have dedicated funds for emergencies without dipping into your regular savings or retirement accounts. Some prime examples of emergency expenses include medical bills, car repairs, home repairs, job loss or surprise trips. These situations can put a dent in your finances; having an emergency fund in place can help you avoid stress and keep your financial health in check.

Why Should I Have an Emergency Fund?
Emergency funds help boost your financial well-being. It’s there to protect you against life’s most unexpected financial surprises, helps you avoid debt and gives you peace of mind. Financial stress can impact your overall well-being, especially when you feel like you are drowning in debt. Emergency funds will help you face these challenges with confidence, knowing that you have financial resources to handle them.

How Much Should I Save?
There are several things to consider when setting a savings goal. Your emergency fund is not a one-size-fits all type of account, but let’s break down what you should keep in mind when you’re establishing your account.

First, take a look at your monthly expenses to calculate the average amount you spend on essentials like rent, utilities, transportation and groceries. This will give you a baseline for how much you need to cover in the event of an emergency.

Next, think about your income stability. If you have a steady job with reliable income, saving three to six months’ worth of expenses is a commonly suggested guideline. If you have a more unpredictable income or work in an industry with higher job insecurity, then it may be wise to aim for a larger emergency fund for a bigger safety net.

Lastly, consider other financial risk factors such as whether you have dependents or family members who rely on your income. Evaluating outside factors can help you determine whether you need a larger emergency fund to account for them. Remember, building an emergency fund takes time, so start saving today and make it a priority to achieve whatever goal you establish.

How do I build an Emergency Fund?
Building your safety net is a key step towards financial security. Here are some tips to get you started:

  • Open an account that provides you convenience and liquidity while earning you interest on the money you deposit. Look for savings or checking accounts that have minimal balance requirements and minimal withdrawal restrictions, ensuring you have flexibility with your funds.
  • Review your income and expenses to help build a budget and find areas where you can cut back on non-essential spending. The money you’re able to save can be deposited into your emergency fund, ensuring that part of your income is saved before you have a chance to spend it.
  • Start automating your savings deposits to help build your emergency fund. You can setup automatic transfers in Online Banking to transfer funds on a reoccurring basis.
  • Staying motivated is hard but setting specific goals and keeping track of them can help you stay disciplined on your savings journey. Make time to celebrate your milestones along the way to keep yourself encouraged and continue to think of all the benefits of having an emergency fund.

Building an emergency fund does not happen overnight, but the peace of mind it brings is worth it. At First Savings Bank, we understand the importance of emergency funds and offer a range of savings accounts and tools like Personal Finance to help you track and reach your financial goals. Visit one of our convenient locations to talk with our account experts about our savings options today!

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