Having an emergency fund to fall back on when you need it is so important for every family. However, if you are new to building targeted savings, you may be wondering how to build an emergency fund quickly and easily. These tips are designed to help you build yours in a way that is quick, easy and sure to help you cover your finances when the next emergency comes.
Once upon a time, I was not very good at keeping emergency funds. It wasn’t that I misunderstood what they were for or that I didn’t know how to build an emergency fund. It was more that I simply had trouble keeping savings where savings should be kept.
In other words, I spent it a lot of the time. At the time, I didn’t understand that emergency meant emergency.
These days I am much better at managing those funds, but it took some time to learn how to build an emergency fund and how to keep those funds strictly for emergencies.
Do I Need an Emergency Fund?
I can’t imagine that I am the only one who has or has had trouble learning how to build an emergency fund. Honestly, I can’t imagine I am the only one who might wonder whether I actually needed an emergency fund.
In a nutshell, the answer is yes. You do need one. However, it is not common for people to have one. In fact, most Americans are only one to three paychecks from a total financial breakdown and can not handle any major emergency financially.
Having an emergency fund allows you to set aside money for those months when your income may be lower than normal or for when you have Little Betsy Sue breaks her arm at softball practice.
They are the funds that bail you out when you find yourself in financial trouble.
In short, yes, it is incredibly important to learn how to build an emergency fund sooner rather than later.
How to Build Your Emergency Fund Simply
Before you can begin building emergency funds, you will want to take the time to figure out exactly how much money your fund will need to have in it.
This is best done by calculating your average expenses over a three month time period. If you are not sure how to do this, total up your expenses for each month going back three months.
How to Track Personal Expenses
If you are not sure how to track your expenses, you can do so in two ways. The first is to print three months worth of bank statements followed by a thorough audit of each statement. As you go through each statement, categorize each expense into the appropriate category.
The second method of tracking your expenses may be easier for those that don’t have the time needed to sit down and do a financial audit. With this method, simply grab an account ledger book or a checkbook register and keep track of each time you spend money. At the end of each week or month, categorize those expenses so you know where your money went.
Add the numbers together then divide by three. This will give you your average monthly expenses.
Now multiply this number by three to get the total amount of money you will ultimately need in your emergency fund.
This is the total mount of money you require in order to have a fully funded emergency fund.
How to Add Money to Your Emergency Fund
Now that you know how much money you will ultimately need, you can work on actually funding your emergency savings account. There are a lot of ways to do this, but the simplest is to cut expenses elsewhere.
- Find new ways to save money on food
- Find new ways to use something old instead of buying new
- Find things to make at home to sell or for your own use
- Learn new “extreme” ways to save money
- Work at cutting your electric costs since those are typically high for families.
There are a lot of things you can do but the one thing you must do is deposit any savings you make into your emergency fund. Even if you have only saved a few cents, that is still a few cents closer to your fully funded emergency fund than you were before.
The more you work at building your fund, the quicker and easier it will be to build. And eventually, you will find that your fund is where it needs to be; safe in the bank and waiting for you.
For those that need a visual representation, having a savings thermometer or something of that sort can be a helpful way to keep yourself on track.
Easy Ways to Add Extra Money to Your Fund
In an ideal world, we would all be able to pull the money to fund our emergency bank accounts to fund them immediately. Unfortunately, we do not live in an ideal world and while you are building your emergency fund, you may find yourself in need of a way to earn extra money.
Luckily, I’ve got you covered with the ways to earn money from home . These ways to earn quick cash are all a great fit for anyone who needs to boost their savings account
If you are looking for a longer list, I recommend you check out THIS post. For this post, I’m keeping things short.