6 easy steps to start your emergency fund

6 easy steps to start your emergency fund

6 easy steps to start your emergency fund

Saving several months’ worth of everyday expenses for an emergency fund can seem intimidating, especially when it seems like every month all of your available money is already earmarked for something else. If your monthly living expenses total $2,000, for example, it would take time to save $6,000, or three times your living expenses, the low point of the typical range for an emergency fund. Following these 6 simple steps can help you start building a cash reserve, which will bring you greater financial stability and peace of mind.

Now try harder

Don’t stop once you’ve reached your original savings goal. Steadily increase your savings goals until you have enough money to cover your expenses for six to nine months, a significant buffer against unexpected emergencies. With that financial foundation in place, you can apply your savings habits to new goals, such as a down payment on a car, retirement, and even your next vacation.

do a breakdown

If you focus on the total it will seem somewhat overwhelming. But a whole is made up of smaller parts, and those are increments you can reasonably achieve each month. Some people, for example, may start with a goal of $100 a month, which is only $3-4 a day but saving $100 a month would give you a $1,200 reserve after a year. Bank of America customers can use the Spending and Budgeting tool to help them identify opportunities to save.
to pick something you can cut out

Daily savings can be accumulated. You could carpool or use public transportation to save on gas, bring your lunch instead of buying it, or cancel a streaming service you no longer watch. Calculate how much you’re saving each month from your daily change, and save that amount by putting it in your emergency fund.

The key is to identify what specific expense you can cut, which is more practical than making a blanket resolution to “save money.” You can change your behavior in general if you start small and in a specific way.

Put technology to work for you

An easy way to save consistently is to set up automatic transfers from your checking account to your savings account. Consider coordinating your automatic transfers with your payday. If you have direct deposit at work, you could have a percentage of your paycheck go directly into your emergency savings account each pay period. Bank of America can help you set up your own automatic transfers (only offered in English).

Don’t let debt get in the way

If you’re having a hard time paying off your debt, saving may be the last thing on your mind. And if your debt has high-interest rates, like credit cards, it makes sense to aggressively pay off balances first. But if your interest rates and balances are lower and you can manage them better, you can try to achieve both goals at the same time. Also, consider setting aside funds each month for both debt and savings.

Keep your money accessible, but away from temptation

Emergency funds must be available when you need them. That means they’re not locked into accounts that charge you for access to your money or kept in an account that you’ll be tempted to use for everyday expenses. Consider establishing separate FDIC-insured, interest-earning savings accounts or a money market account.

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