An emergency fund is an essential safety net that everyone should have sitting in the bank. It can help you handle urgent, unexpected expenses and major life upheavals.
Without one, you might be at a loss on how to cover an emergency expense without disrupting your ability to pay the bills for the rest of the month.
In this scenario, you have two options. If your credit card’s balance is nowhere near the limit, you can charge the expense to the card and then pay down the balance later on. Or you can try to get a personal loan online to help you manage the emergency. If you meet the loan’s qualifications, you can apply and see whether you get approved. An approval means that you can use the borrowed funds and focus on repayments afterward.
While these options are available, you should really try to have an emergency fund with plenty of savings inside of it. The rule of thumb is that you should save three to six months’ worth of income in your emergency fund. That amount can help you handle small emergency expenses like car repairs and home repairs immediately. It can also help you stay afloat for weeks when your regular income isn’t available (for example, you lose your job).
How can you get your emergency fund from empty to full? It will take time and dedication, but if you want to speed up the process, you should read these tips for boosting your emergency savings.
1. Automate Your Payments
Your emergency fund won’t grow very quickly if you keep forgetting to add to it. How can you stop your contributions from slipping your mind? Automate your money transfers from your checking account into your savings account through your online banking. This way, you’ll build up your fund without thinking about it.
2. Increase Your Income
If you’re impatient for your emergency fund to grow, you can try to increase your income so that you can make bigger contributions every month. How can you do that? Depending on your current job, you could ask for a pay raise or take on more overtime hours to bulk up your upcoming paychecks. You could also take on a side-hustle like selling second-hand items online in your free time. You’d be surprised by the profits that you can rake in!
3. Use Your Windfalls
Sometimes, you’ll be lucky enough to get a windfall, like a generous bonus from your workplace or a surprise inheritance from a relative. Take advantage of this sudden influx of funds!
You don’t have to put the entire windfall into your emergency fund, but at least put a portion of it there. It will instantly give your emergency fund a big boost without too much effort on your part. You’ll get one big step closer to your savings goals.
4. Change Accounts
After you’ve accumulated a significant amount of savings in your emergency fund, you should consider moving the total into a high-yield savings account. A high-yield savings account has an interest rate that will help your balance slowly grow, making your safety net more secure the longer that it sits there.
It’s time to build and boost your emergency fund. The sooner that you fill it up, the better.