You need to pay for a sudden car repair in the thousands of dollars, but your meager savings account can’t help you. Now what?
You’re not the only person facing this scenario. Research shows that Canadian households on average save just under around $900 per year.
Unfortunately, you may not be able to swing an emergency car repair right now. But the good news is that you can start saving today to adequately prepare for future savings.
Here’s a rundown on six tips for starting your emergency savings fund.
Let’s get started!
1. Establish Small Savings Goals at the Beginning
One of the best ways to create a financial safety net is to set smaller goals for your savings rather than a large one. In doing so, you increase your chances of successfully building savings.
For instance, don’t start by shooting for six months of savings right away. Begin by saving up for two weeks’ worth. Do whatever is necessary to make that first goal attainable for you.
If you reach Goal #1, you’re more likely to feel motivated to target a slightly larger Goal #2 and, later, Goal #3. At that point, setting money aside will become second nature, which means the saving process will become easier and easier.
Also, once you’ve reached your initial goals, continue to create more goals. Don’t stop saving.
2. Make Your Savings Automated
You can also more easily save money by automating the process.
For instance, let’s say that your employer provides direct deposit. Create an emergency fund account, and arrange for a certain percentage of your check to automatically go to this account. You can do this through your bank or your employer.
Also, make sure that your emergency funds account is an actual savings account, as savings accounts are harder to access than checking accounts are.
In addition, don’t constantly monitor your account balance, as this may make the savings process seem too slow. Instead, just let the automated process work its magic while you focus on your daily commitments. Then, check your account a few months or even a year later to see how far you’ve come.
3. Think “High Yield” Long Term
As you save money for future emergencies, ensure you’re not stashing away too much money in a regular savings account.
Your goal should be to set aside just enough cash in your savings account, which is a low-interest-bearing account, to cover an emergency. Once you’ve done this, you should start diverting your money to a retirement account, which should produce higher yields. This will allow the funds to begin earning more money over the next several years.
Along with putting money in a retirement account, though, consider adding money to savings accounts with high yields, like guaranteed investment certificates and money market accounts. Like your retirement account, these accounts will allow your money to grow faster than it will in a savings account.
However, unlike a retirement account, these accounts are more liquid. This means you can get money from them more quickly and easily in the event of an emergency. You can also withdraw funds from them without penalties — something you won’t experience with a retirement account.
4. Make Regular Contributions to Your Emergency Savings Fund
Be consistent in setting aside money for savings. As we mentioned earlier, automating the savings process is a simple way to do this.
Also, to make the savings process even easier from month to month, look at your budget to pinpoint an expense you don’t need. Then, put the money you were using to cover that expense toward savings instead. That expense could be daily coffee or even a monthly streaming service subscription.
5. Keep Paying Off Debt, Too
As you focus on creating a healthy savings account, be sure to keep paying down your existing debt as well.
You may currently be trying to pay off a high-interest credit card or loan. Balance this effort with your desire to save by establishing a savings goal that won’t interfere with your debt payment goal.
This is important because the debts you currently have are costing you heavily in the form of interest. And this interest may end up canceling out any money you’re saving in your emergency funds account. So, it’s best to target your debt mostly first and then accelerate your savings process once your debt is paid.
6. Put Away Your Windfalls
While saving for the future, you may find yourself receiving windfalls of cash from time to time. Rather than spending these lump sums of cash, stash them in your savings fund right away.
These windfalls may range from tax refunds to stimulus checks, rebate checks, and even birthday card money from uncles and aunts. You won’t miss this cash since it’s not factored into your regular budget, so set aside for a rainy day. It will only help you to reach your emergency savings goal even faster.
How We Can Help
Building up your savings account as soon as possible is critical for ensuring that you can handle any financial surprises that come your way in the years ahead. Fortunately, by starting with small savings goals and gradually increasing your savings over time, you can create a healthy emergency savings fund long term.
If you need help with covering an emergency cost in the meantime, we have you covered at Kingcash. We offer personal loans that are simple to obtain, convenient, and fast. Claim your rapid cash loan now!