Do you have an emergency fund? If you said no, you are not alone. There are millions of Americans that are living without any savings that they could draw on in the event of an emergency. The share of working Americans living paycheck to paycheck has increased considerably in the last decade and consumer debt has skyrocketed over the same period.
Cash-strapped individuals have a harder time saving for their future because there are so many demands on their limited number of dollars, but having an emergency savings account that is well funded can increase financial stability and reduce the accumulation of high interest debt. Emergency funds are so key to financial stability that everyone should have one. Here are some tips that will help you build an emergency fund fast.
Choose A Set Amount To Save
Choosing a set amount to save each pay period is a good way to start building your emergency fund fast. You should choose an amount that you can afford to save while still maintaining your current lifestyle to make the transition easy. It does not matter what amount you begin to save as long as you are saving something. If the amount of your paycheck fluctuates each pay period, you can choose to save a percentage of income instead of a specific dollar amount. As your income grows, the amount of money placed in your savings account should grow as well and choosing a set percentage is a good way to ensure that happens.
Direct Deposit Your Savings
To make sure that the amount you intend to save actually gets into your emergency fund; you should have your designated amount deposited directly into the account each pay period. Most employers that offer direct deposit will allow you to split your deposit into several accounts and you can designate the amount that is put into each account. Once your emergency fund is fully funded, you can divert the amount into another type of savings account, like an individual retirement account or a college saving account.
Save At Least Half Of Windfall Payments
If you receive a large amount of money outside of your paycheck, such as an income tax refund, a bonus, or some type of winnings, you should deposit at least half the amount into your emergency fund. This gives you a considerable amount to spend on current needs while saving the rest for your future needs. Having the discipline to save half of these payments will boost your emergency fund by a considerable amount and help you reach your saving goals faster.