- 7 17 Staff
Building An Emergency Fund During A Recession
Life can unexpectedly send a lot your way. Loss of a job, unexpected medical expenses—you never know what might arise. That’s especially true during a recession when finances are already tight.
You may not be able to prepare for every unexpected event that may come your way, but you can build an emergency fund to help sustain you in hard times. Ready to start building your emergency fund? Let’s explore how.
What Are Emergency Funds and How Much Should You Set Aside?
An emergency fund is money specifically set aside to cover unplanned expenses. This stash of money helps alleviate financial stress after an unexpected event, helping you tackle the event without adding financial worries to the things you’re handling. Plus, this stash of money will give you confidence and knowledge that you’re prepared in case of an emergency, instead of merely hoping you’ll get by without any emergencies.
Overall, the right amount to set aside depends on your unique financial circumstances; however, there are some guidelines you can follow. If you’re just starting out on your own, set aside enough to cover an important bill—but strive to keep increasing the amount and setting aside additional funds. Ideally, you’ll want approximately six months of expenses set aside.
Tips for Building an Emergency Fund
Starting an emergency fund may seem overwhelming at first, but the good news is that it’s tailored to you and your unique circumstances.
Put Money in a Savings Account
One of the key things to remember is that you want the savings account easy to access—don’t tie up the money in investment funds—but not so easy that it’s tempting to use the funds for other kinds of spending.
Start small with your goals. Breaking your goals into smaller, more attainable milestones gives encouragement to keep going.
If you’re struggling to cover bills as it is, starting an emergency fund can seem overwhelming. But remember that every little bit counts. Even setting aside $20 a month will help give you some cushioning in case of an emergency. Plus, this amount will continue to build up and you can always add more to your fund if you have extra to contribute.
Make it Automatic
When you’re just starting your emergency fund, it can be hard to remember to contribute money because it’s not something you’ve had to think about until now. The best way to get around this is to make saving automatic. For example, if you have direct deposit, see if your paycheck can be split between your checking and savings accounts so the money doesn’t touch your checking account.
Treating your savings contribution like it’s a bill can also help you build a savings habit. When you’re paying your monthly bills, also use that time to put money in your emergency fund.
Regularly Reevaluate Your Contributions
Periodically check how much you have saved and if you need to make adjustments to how much you’re saving. If you’ve reached your goal of saving approximately six months of expenses, it may be a good idea to start investing or contributing to another savings account for expenses such as clothing, vacations, and other inevitable items.
Ready to Get Started?
Setting up an extra layer of financial security with an emergency fund is essential for the unexpected things life may throw your way. Make sure you’re investing in your future and protecting yourself as much as you can from financial hardship by starting an emergency fund today. 7 17 Credit Union has several resources to help, including savings accounts.