How to Build and Grow an Emergency Fund

How to Build and Grow an Emergency Fund

No one can predict the future. Our life will have ups and downs which we need to deal with. That’s why it is a good idea to prepare by building an emergency fund.

An emergency fund can be used to help you during a financial crisis. It serves as emergency cash you can use when you find yourself in an unexpected situation such as losing your job, having a major health problem, unanticipated home/car repairs, and more.

If you’re just starting out or you want to grow your emergency fund, here are some tips and tricks you can do:

1. Know how much you need to save

Start by checking what your monthly expenses are, then determine how much you need for your emergency fund.  The money saved should be enough to cover your expenses. Three to seven months’ worth of emergency cash is a good amount of money to aim for.  

2. Automate your savings

A lot of people spend first then save what’s left of their salary. This tends to reduce the amount they save. A solution is to set up an automatic transfer from your transaction account to your savings account every time you receive your pay. This means it won’t be a hassle to transfer money and you won’t forget to put money aside for your emergency fund.

3. Buy only what you need

Controlling your expenditures can be a huge help in building your emergency fund. Buy only what you need and avoid impulse purchases. Saving for an emergency fund may require a bit of a lifestyle change such as bringing lunch to work, using public transportation, cutting down on cable television, and buying things second-hand.

4. Earn more cash

If cutting back your spending is not an option, earning more is a good way to grow your emergency fund. You can sell your pre-loved items through a garage sale or online. Get a freelance job. Rent your spare room or baby sit. Be creative in finding ways to earn more money.

Final word

Building an emergency fund is a slow process. Don’t fret if you have to start small, just remember to keep at it so your emergency fund grows. 

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