An emergency fund is very important for families. It can cover expenses for a few months if a job is lost or if a medical emergency occurs. Saving enough money to build a substantial emergency fund is not always easy. Other daily expenses and conveniences sometimes take precedence. Four tips will help when saving money for an emergency.
1. Automatic Deductions
One of the best tips is to use automatic deductions whenever possible. This means that a set amount of money will be automatically taken out of a paycheck or deposit and placed into a specific savings account. Automatic deductions make saving for an emergency easy by removing the need to transfer money manually each pay period.
2. Sacrifice One Large Purchase
Many people will make one large purchase every year or every few months that is not strictly necessary. This expense could be jewelry or a new tech gadget. One way to build an emergency fund fast is to take the money that would be used for this purchase and place it into the fund. Doing this a few times every year will grow the emergency fund quickly. This is a way to save that does not take away from other necessary expenses or items like retirement savings.
3. Pay down Debt
It is very difficult to save money when dealing with a large amount of debt. Large debts often accrue extra interest and fees over time that will cut into emergency savings. A good solution for paying down debt is to borrow money from a company like eTitleLoan. Car owners can visit eTitleLoan.com and apply for a loan that is secured by a vehicle. The loans are approved quickly and without a credit check. Repaying the loan is often less costly than dealing with revolving late fees and other charges. This makes it easier to save.
4. Invest Emergency Savings
Keeping an emergency fund in a low-interest checking account is not always the best way to save money. Emergency funds kept in liquid investments can earn more money every year. Households will want to consider investment vehicles like money markets that have very low risk, good rates and high liquidity. High liquidity means the money is always accessible if an emergency occurs. Investing the money in the emergency fund can automatically increase savings annually.
Saving for an emergency requires persistence. The fund should never be used to cover unnecessary purchases. Additionally, the maximum amount in the fund should be increased every year to keep pace with inflation. Maintaining an emergency fund will prevent unexpected expenses from causing a financial disaster.