Imagine you’re in one of the following scenarios:
- You lose your job
- You become very ill
- You need to move
- Your car breaks down
- Your house starts leaking
Do you have enough saved to make it through?
Most Americans don’t. The National Foundation for Credit Counseling found that 64% of Americans don’t have enough cash to handle a $1,000 emergency.
Investigating further, 17% said they would borrow from friends or family, 17% said they would neglect existing obligations and 9% said they would look into cash advance stores. None of these are great options.
If you want to start an emergency fund, it’s important to understand how much you need to have saved and how to start saving.
How Much Should Be in Your Emergency Fund?
The necessary amount for an emergency fund is a debatable topic. Some financial experts will argue you don’t even need one; they believe working on good credit will allow you to borrow the money you need should you find yourself in that situation.
However, it’s more comforting to have the cash saved and on hand. Starting with a goal of $1,000 will help. Even if it doesn’t cover everything you need, it will put a dent in it.
Most experts say that the end goal should be to have three to six months of your current monthly salary saved up. This allows you to have a comfortable cushion to fall back on if you need it.
How To Start Saving
Three to six months may sound great, but maybe the $1,000 goal feels daunting to you.
Here’s what to do:
- Think slow and steady. Even if you start with just $10/week – that will add up! Many people get caught up in how long it will take them instead of just starting and sticking to a plan. Use the “pay yourself first” strategy and treat your weekly savings as a bill.
- Try do something extra to earn money faster. You can sell things you don’t need, take online surveys or do one-off tasks for cash.
- Keep your savings in an account that earns interest. Find a savings account that will help you earn money. Once you earn enough, you can put that money in a share certificate (CD) to earn even more.
Want to know ways you can cut your budget and save even more? Click here to download our guide for saving money at home!