Anything can happen anytime, anywhere. We don’t know when trouble will happen, and while it’s wrong to constantly think about horrible things happening to you or someone close to you, it is best that you have prepared for the worst to come. Having an emergency fund is an excellent way of making sure that when the time comes that something unexpected happens, you will be prepared for it, making it less heavy on your finances.
An emergency fund is money we put aside in the bank to cover life’s unexpected events. It’s somewhat similar to insurance, but rather than paying premiums, you’re paying yourself money by putting it in the bank, which you can use later. So, if something unfortunate occurs, you can get cash quickly. Opening an account is one of the best ways to start an emergency fund. The UFB Direct High Yield Savings offers one of the highest interest rates available for your money, with an annual percentage yield (APY) of up to 4.11%, so if you haven’t done so already, this is something that you should also take into consideration when thinking about your options.
So, how can you build an emergency savings fund? Here’s how.
- Make a budget
As with anything, budgeting is the first step. This allows you to manage your finances better and discover strategies to reduce your expenditures. Start by detailing your monthly income and spending. Then, organize your expenses according to your necessities and desires. Once you’ve determined how much you can spend in each category, lock that amount.
- Set a monthly savings goal
This is the amount of money you want to work toward and add to your emergency fund every month. Putting away a portion of your monthly salary can be hard if you are a single-income family or are just making enough money. That is why budgeting is important. It can be hard to save a big amount each month, but it is possible to save a small amount each month.
- Open a Separate Emergency Savings Account
Once you know how much you want to save, you should open a savings account that is separate from your personal account. A separate savings account creates a mental wall between the money you can touch and the money you shouldn’t. If you combine the money in your emergency fund and your personal account, you’ll be more likely to spend it because you’ll see it often, and it will be easy to get to.
So, when you open a savings account for emergencies, take some precautions to keep your money safe from you. You can open an account at a different bank than the one you usually use. Look around and find a bank like UFB Direct High Yield Savings that can give you a savings account with a good interest rate and no or low fees.
- Lessen Expenses and Boost income
Increasing the amount of cash that you have available and decreasing the amount that you spend can both make a difference. Make an effort to reduce your costs as much as you possibly can. You shouldn’t purchase something simply because you have the need to do so. Before you make a purchase, give it some serious thought. Is it something that would help you? Or would that just be a waste of your money?
Also, instead of going out and eating with your friends, have a homemade meal at home instead. This does not mean, however, that you will never again go out to eat with your friends; you may still go outdoors and treat yourself to a great dinner, but this should not be something that you do on a daily basis.
You could also explore additional sources of income. Because of this, you will be able to save more money. The best way to increase the amount of money you make is to take on a second job. Consider working as a freelance writer for a few articles or blog posts if you enjoy writing. You can also make some extra money by selling your handiwork if you’re exceptionally talented in the craft department. Or, if you have some free time on your hands, you can make some extra money by taking surveys, offering to run errands for other people, or participating in paid focus groups.
The past years have made us realize the importance of having an emergency fund. Many unanticipated events have taken place as a direct result of the COVID-19 pandemic, which has caught everyone throughout the world off guard. Many people were forced out of their employment and lost their incomes when practically every nation went into lockdown at the same time. But despite losing their job, they still have to pay for their expenses, such as water and electricity bills, as well as their medical bills since many people got sick. By having an emergency fund, somehow, you will still be able to pay for those while you look for a new job. That way, it wouldn’t bring you so much trouble considering the constant stress and worries brought on by the pandemic.
So, an emergency fund can make the difference between financial failure and financial success. Having money in an emergency fund will help you get through anything that comes up out of the blue. Even though saving money, let alone an emergency fund, can be hard, especially if you have debt payments and other financial obligations, you should still think about it. It doesn’t matter if you save a huge amount of money or a small amount. What’s important is that you save some of your money for emergencies. Even a small amount can be a lifesaver when your financial situation changes unexpectedly.