One of the most important financial decisions anyone can make is setting up an emergency fund, or a bank account that’s set aside for unplanned or urgent expenses. While most adults are likely familiar with the concept of an emergency fund, studies show that few people actually consistently put money aside for emergencies, leaving many individuals or families in a difficult situation financially should an unexpected cost arise. If you are looking to build your emergency fund, here are a few tips to help you get started.
Determine Your Goal
If creating specific savings goals helps you manage your finances, determine what your ultimate goal for your emergency reward is. Think about the unexpected expenses you are hoping to plan for, whether it’s sudden unemployment or medical bills from providerschoicess.com, and go from there. Look at your finances and determine where spending can be cut, then begin putting that money aside into your emergency fund each time you’re paid. Once you have a fund established, you can gradually increase the amount of money you are saving over time.
Set Up a Direct Deposit
Split your paycheck’s direct deposit into two bank accounts, one of which is reserved for emergencies. This takes the guesswork out of putting money aside into a savings or emergency fund, and ensures that money is being put in the account each time you get paid. Keeping your emergency fund money in an entirely separate account also takes away the temptation to spend it on other things, and adds an extra step for you to access this money in the first place.
Save Unexpected Money
Should you receive any unexpected money in the form of a bonus, gift, or refund, you might be tempted to spend it; however, placing it in your emergency fund would help you to grow this account even quicker. Putting unexpected money aside in an emergency fund is a better investment than spending it on a quick impulse purchase and will set you up for financial success in the future.
Continue Saving After Reaching Your Goal
The key to maintaining a useful emergency fund is by continuing to save money each month even after you’ve reached your savings goal. This will only make things easier for you in the future, as you will likely have enough money saved up to cover multiple unforeseen expenses or emergencies.