7 Steps to Building an Emergency Savings Fund

Let's be honest... no matter how well you plan and prep for emergency savings, the truth of the matter is something unexpected and un-budgeted is going to happen. Unfortunately, these big curveballs life throws at you aren’t typically cheap enough that skipping a subscription payment like Netflix will put your budget back on track.

Whether you’re just starting out with your first job and needing to replenish your emergency savings thanks to something unexpected, using these 7 steps to build your emergency fund will put future you in a really good financial situation:

1. calculate your monthly income 

This will give you a baseline for how much you make per month and will give you a clear picture of how much you can realistically save per month or per year. When calculating your monthly income, make sure to take into account how much of your paycheck is removed for taxes and your retirement savings.

2. determine how much you need to save

A good rule of thumb is to save enough for 6 months of your monthly spending. That means EVERYTHING. Include your rent or mortgage, utilities, other bills, and don't forget to add a cushion for groceries and gas. 

Setting your goal amount to save each month doesn’t have to be drastic. No matter how much you start to save, you’ll be doing more than you were the day before. 

 3. find ways to add to your fund

You should treat saving for your Emergency Fund as a bill to be paid, just like it’s a priority to make your car payment. How?

• Automatic Transfers: You could use the "set it and forget it" method by setting automatic transfers to move money into your savings without having to lift a finger. 
  
• Direct Deposit: Taking it a step further, you can set up your paycheck to have a portion directly deposited into your Emergency Savings account, taking away the temptation of spending the money rather than saving it
• Old Fashioned Piggy Bank: If you tend to deal with cash, you could go "old school" with a piggy bank and stash the extra cash you have in there. (Psst... don't forget, having your savings in cash won't earn you any interest like keeping that money in a savings account would.) 

4. create a budget and write down your spending

This will not only help you stick to your savings plan but will also allow you to see where you’re overspending and find ways to reduce your costs. If you haven’t already, download the Smart Budgeting Guide for a free printable monthly budget and spending tracker to help get you started:

5. open an account that will work for you

The type of account you choose to use for your Emergency Savings will vary based on your situation and current financial needs. 

A Money Market account is an attractive type of savings account for an Emergency Fund because you’ll earn more thanks to a higher interest rate than in a regular savings account, but you still have easy access to your funds without being penalized (like with a Certificate of Deposit).

6. set attainable goals

It’s not possible to reach your full emergency savings fund goal in just a few weeks – or even a few months – and that’s ok! It’s a process to save such a big chunk of money, so make sure you set realistic goals to keep motivating yourself.

If simply saying “I want to save $6,000” seems a little overwhelming, determine a smaller amount of money you want to save by a certain date, and continue to set your goals from there.   

 7. make adjustments

Like everything in finances, things will change.  It never hurts to save money, so even if you reach your goal amount, continue to increase your goal - you’ll only be helping your future self!

you've got the steps to get started... now what?  

Now that you know what to do in order to build an Emergency Fund,  remain focused and stick to your savings plan, and remember: 

If you think you need help getting started and determining how much you need to save, any of the branch staff at Skyla will be more than happy to help! Send us an email, give us a call at 704.375.0183, or stop by any of our branches to get started.