How To Start Building An Emergency Fund For a 6-Month Period
How to start building an emergency fund – Even though financial knowledge is severely inadequate in our country, we all share the same fundamental belief: Everyone should have an emergency savings account.
The idea is straightforward: You earn a certain amount of money, and you set aside a portion of it in an account that you only access when times are particularly rough and you need money for things like a new auto component or an unexpected medical expense. However, starting to accumulate a six-month emergency fund (the suggested amount) can be difficult.
How Long Does It Take To Build An Emergency Fund? Where Do You Bigin?
A six-month emergency fund gives you a balance between security and flexibility. It offers much more breathing room than three months of living expenses. At the same time, it doesn’t require nearly as much money as a 12-month emergency fund. That balance makes the six-month emergency fund a popular choice.
We have outlined a multi-step strategy with the assistance of finance professionals on how to start building an emergency fund for a six-month period.
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How To Start Building An Emergency Fund
1. Keep Money in a Reliable Savings Account
On how to start building an emergency fund, you must first decide where to store your emergency fund before you can begin to accumulate it. Two essential features of a good emergency fund account are easy money access and a generous interest rate. For this reason, many professionals advise you to open a high-yield savings account.
The customer can earn interest rates on high-yield savings accounts, some of the best we’ve seen in a long time. Additionally, your money is still available for use even while you are earning high rates. Alternative savings options like a 401(k), a CD account, or stock market investments could not allow you to quickly access your money in an emergency. With a high-yield savings account, you have full access to your money and can withdraw any moment with no penalties.
Bask Bank’s Interest Savings Account is an ideal choice for building an emergency fund. With a 4.15% variable APY (annual percentage yield), you’ll be earning more than 12 times the national average, which means your fund grows at an accelerated rate. Plus, the Interest Savings Account charges no monthly fees, so your savings stay with you, earning interest. It’s also great for those who are just starting to save, because there’s no minimum deposit required to open an account and no minimum account balance. (You just need to fund your account within 15 days of opening it.)
Finally, Bask Bank makes it effortless to access your account, whether you want to make deposits, withdrawals or check your balance.
It’s easy and convenient to put money in when you want to save or take money out right away if you need it. You’ll also be able to keep track of your savings and watch it grow both online and through the Bask Bank mobile app.
2. Go In With the Right Mindset
Saving is primarily a mental game that you can win. Setting away even a tiny amount of money on a regular basis can eventually lead you to your objective, no matter how low your starting point is. Time and a little self-control are all that is required.
3. Get an Accountability Partner
For how to start building an emergency fund, get an accountability partner. The journey to starting and faithfully contributing to an emergency fund is more successful when done with a partner. Consider working with your financial advisor to help you stay on track.
4. Map Out Your Spending
Take the time to distinguish what your necessary expenses are, and what your discretionary expenses are (i.e. streaming services, shopping for clothes), according to an EVP of American Consumer Credit Counseling (ACCC). If you’re in a tight spot financially, you may want to cut out some discretionary spending. Your emergency fund should cover your essential needs. After you calculate your total expenses for one month, multiply that number by six. The final number is how much money you should have for your six-month emergency fund. This is one of the best ways on how to start building an emergency fund.
5. Automate the Process of Saving
An effective way to ensure your emergency fund continues to grow is by setting up automatic contributions. Good high-yield savings accounts allow you to do this easily.
One of the great things you can do with a HYSA, especially at Bask Bank, is setting up direct deposit to grow your savings even faster. If you don’t have immediate plans for a percentage of your income, you can have that difference deposited into your Bask Bank account. You won’t have to think about it, and it will automatically start earning you interest.
With the start of the New Year, you might have just received or may be about to receive a bonus or annual raise. If you’re living comfortably at your current income level, take the bonus amount or percentage increase and deposit it directly into a Bask high-yield savings account and start earning interest on it to help you unconsciously reach your savings goals.
6. Start Setting a Percentage of Your Paycheck Aside
How to start building an emergency fund? Start setting a percentage of your paycheck aside. Once you’ve determined your monthly expenses, it’s time to start putting aside money for your emergency fund. If your budget allows, save 5 to 10% of your paycheck. To add even more money to your emergency fund, consider cutting out discretionary spending (such as on coffee or going out to eat) for a few months. If you receive any cash gifts, tax returns, or have leftover money from your budget you didn’t spend, redirect all that to your emergency fund.”
7. Rethink Subscriptions and Sign Up for Promotions
Whether it’s your cable company, cell phone provider, or gym membership, it’s time to rethink the value of your subscriptions to their services. You have probably forgotten about other subscriptions, yet they continue charging monthly fees. Consider canceling, putting some on hold, or renegotiating the deals to free up critical funds to be redirected to your emergency fund.
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8. Set Small, Inspiring Goals
On your quest on how to start building an emergency fund, set small but inspiring goals. Instead of one major savings goal, make multiple smaller ones. Prepare for success from the beginning. Plan for one month’s worth of spending rather than three months’ worth immediately. Or you could wait a month. Whatever you need to do to make your initial objective seem attainable. Once you accomplish your first goal, you should feel inspired to continue with a slightly bigger goal.
Make your second goal even more challenging, and your third goal even more challenging still. As time goes on, you’ll have developed a habit of saving, and the positive motivation you’re generating by achieving modest goals will help propel you toward bigger ones.
9. Set a Long-Term Goal As Well
How to start building an emergency fund? Set a long-term savings goal for an amount that you want to meet. Then break that down into smaller daily saving amounts that you can maintain in order to achieve that bigger goal. For example, if you wanted to save $500 over the next six months, you’d set a daily goal of saving — at minimum — of approximately $0.34 cents a day.
10. Don’t Increase Your Monthly Expenditures or Get a New Credit Card
Don’t allow yourself to be lulled into a false feeling of security about your financial situation once you’ve established automated savings. In the example of giving up a new pair of shoes every month only to replace it a few months later, you’re not saving at all.
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11. Tap Into the Gig Economy
How to start building an emergency fund – If you’re living paycheck to paycheck and saving from your paycheck just isn’t going to happen, consider nabbing a side hustle — the market for those jobs is hot right now.
For those who can, this is a time to take advantage of the high hourly rates many businesses are offering for part-time positions. Working extra hours at a retail store or even your own workplace may not be exciting, but it’s a great way to generate extra income and get that fund built up.
Why It’s Time To Create An Emergency Fund – How To Start Building An Emergency Fund
The start of a new year is frequently chosen as the time to concentrate on financial objectives. However, the current rate environment makes this a particularly advantageous time to start an emergency fund. High-yield savings account rates are at their highest level in a long time, and savers may benefit from these rates right away by creating an Interest Savings Account.
It takes discipline and commitment to accumulate a six-month emergency fund, but by following these guidelines, you can get there.
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