Top 4 Tips for Building Up an Emergency Savings Fund

Everyone knows the importance of saving for a rainy day. Unfortunately, not enough people actually practice what they preach, with 28% of Americans having no emergency savings. So, how much should you have saved up for emergencies such as unforeseen medical bills, car repairs, and home renovations? Ideally, you should have between 3-6 months of your living expenses put aside to ensure that you can still pay your mortgage, rent, utility bills, food costs, etc., if something happens that impacts your ability to work or you have sudden unexpected expenses.

Now the hard part; how do you go about building up an emergency savings fund, especially if you do not have a lot of expendable income? Keep reading to discover the top four ways that you can start saving today, and don’t worry; you won’t have to make any major cutbacks that will significantly impair you and your family’s quality of life.

Create a budget
One of the easiest ways to waste money without even realizing it is by not having a family budget. If you simply go to the grocery store as and when you need something, or you fail to compare the costs of different utility providers and just accept the rate you are given, then you will struggle to find additional funds for emergencies. Therefore, it is a good idea to create, and stick to, a realistic budget that includes putting money aside for your rainy-day fund.

Have a fallback option
Unfortunately, life has a way of throwing you curveballs when you least expect them, from a sudden illness to unexpected redundancy, to a leaking roof, etc. And if you haven’t yet been able to start your emergency savings fund, then you will need to find another avenue to help you cover the costs.
You may not have wanted to have to borrow money to get your family through a difficult time, but if you do, it is vital that you find the very best deal and look to compare personal loan rates online before you make a decision.

Sign up for automated transfers
If you find that your bank account is always empty by the end of the month, why not set up an automatic transfer of your chosen savings amount that is immediately taken from your bank when you get paid? As long as you have sufficient funds to pay all your bills, then this is the most effective and simplest way to save. This can also help you to waste less money on a monthly basis as your disposable income will be reduced.

Prioritize debt
If you have any high-interest debts, then it is essential that you prioritize paying these off. That being said, you should still try and save some money towards your emergency savings fund, or you risk having to borrow more if the worst does happen.

A good rule of thumb is to use 75% of any spare money to pay off your debts and keep back the other 25% for your emergency fund, gradually increasing the rainy-day savings as your debt decreases.