Emergency Funds: Saving makes a lot of "cents!"
In a recent survey, Bankrate.com found that more than 60% of American consumers do not have enough savings to pay for an unexpected $1,000 expense! 18% of respondents said they would have to put the expense on a credit card and pay it off over time, incurring high interest charges. Another 18% said that to manage a surprise expense without borrowing, they would have to take it from their designated savings.
That’s why it is important to consider starting an Emergency Fund. If you’ve ever experienced an emergency expense, then you already know how stressful it can be to seek alternatives to find the money you suddenly need. Overall, people want to make good financial decisions, but many don’t know how to start. We have prepared the following tips because we want to help you become more thoughtful about saving and spending.
What is an Emergency Fund?
An Emergency Fund is a type of savings account used only for family or household emergencies. Essentially, it is money set aside to cover costly, unplanned expenses. Think of it as an insurance policy, or a safety net for the unexpected. The fund’s goal is to keep you from having to borrow money, max out your credit cards, dip into your child’s college fund, or tap into your retirement savings when life becomes financially challenging.
Start Small
To begin, set a realistic savings goal of say $500 or $1,000. Reaching that first goal is important because it provides motivation to keep going and propels you toward larger ones. Start by opening a savings account with no monthly service charges and no transaction fees; you certainly don’t want to pay for an account to build your savings. Establishing your Emergency Fund is easy, and it’s totally free with a RiverLand Savings Account. As a member, you can have multiple accounts under your primary account, so you can keep your Emergency Fund separate from your other accounts all while avoiding fees, plus interest is paid on balances over $105.
Curb Consumption
To build your savings, start by looking at everyday saving opportunities like skipping that $5 morning latte and passing on that $15 lunch. Instead, start your day by making your flavored coffee and bring a sandwich or frozen meal for lunch. Then put that$15-$20 a day in your Emergency Fund and watch it grow. In a year, you could save more than $1,000! Also, consider eliminating nonessential expenses like apps that are convenient, but hardly used. Choose the best and cancel the rest. This could move another $5 a month from your expenses into your savings. And do you really need five different streaming services? Eliminate multiples and settle on one for a month or two, then switch to another. By alternating services, you get to view the latest releases each has to offer without paying multiple fees. And don’t forget the rarely used kayak that’s taking up space in your garage. Would it be more valuable as cash in your Emergency Fund? Convert those unused possessions to cash by selling them and boosting your savings.
Direct Deposit
By far, the easiest way to save money is by making regular, Direct Deposits from your pay because you never touch it in the first place.
Start with a small amount, maybe $25 or $50 per paycheck. Once you are comfortable with saving in small increments, increase the amount by $10 or $20 per pay period so you don’t feel any discomfort.
Stash Windfalls
You may also kickstart your savings with any money you receive in addition to your salary. If you expect a tax refund, Direct Deposit it to your Emergency Fund. And start saving financial windfalls like bonuses, overtime pay, economic impact payments, rebates, and
“cash back” earnings. Saving rather than spending extra money will build your fund sooner, giving you
a lot of dollars and a greater sense of peace!
Article Resources: Investopedia.com, Consumerfinance.gov, nerdwallet.com, forbes.com, Bankrate.com, badcredit.org, CNBC.com, ramseysolutions.com.
