When Should I Use My Emergency Fund?
- A simple savings account connected to your checking account
- A money market account that comes with a debit card or check-writing privileges
- An online bank that pays a higher interest rate and where you can still transfer money quickly and directly to your checking account
When you’re trying to decide where to keep your emergency fund, the most important thing is that you can pay that doctor or mechanic quickly and with no headaches.
But make sure you’re not keeping your emergency fund in a place that’s too easy to access. My husband and I keep ours at a completely different bank than our other accounts to make sure we can’t just dip into it whenever we want. And turns out-we’re not alone! Our State of Personal Finance Study found that 63% of people who have an emergency fund keep it separate from their checking and savings accounts.
When a sudden expense pops up, it can feel like an emergency-but that might not be true. Here are three questions to ask yourself to see if you need to tap into your emergency savings:
- Is it unexpected?
- Is it necessary?
- Is it urgent?
The more you answer yes, the more likely the situation you’re in is an emergency and justifies using money from your emergency fund.
1. Make a budget and live by it.
A budget doesn’t tell you what you can’t do-it shows you what you can do. So, list out all your monthly income and any expenses. When you’re making your budget, you’ll be able to see how much money you have available so you can be ready to jump into the next step. My favorite budgeting tool (hands down) is EveryDollar. Not only is it free, but it actually helps you save money the longer you use it. With your EveryDollar budget, you can create funds, track debt, organize your expenses, and more. Download it here and create your budget today!
2. Set a monthly savings goal.
This is how much you want to set aside each month to continue building up your emergency fund. As a natural spender, I know that taking money from your paycheck and putting it away to save for the future can be really hard. But you’ll be amazed at how quickly your savings can grow if you’re consistent about adding to it! Don’t know how much is the right amount? Go back to step one and work that budget.
3. Adjust how much you save.
As time goes by, you might be able to save even more! If you or your spouse get a promotion at work, that means you can add more cash to your savings. Be sure to look over your budget for new ways to tighten the purse strings and up the amount you’re saving.
Quick Ways to Start Your Emergency Fund
- Sell stuff. One of the easiest ways to beef up your emergency fund is to sell some stuff! Go take a look in your garage or dig through your closet. Is there anything you could part with? Selling some items that are collecting dust can add up to major cash in your emergency savings. And every little bit helps! You’d be shocked at how quickly $5 here or $10 there can add up.
- Boost your income. Let’s not forget about that wonderful four-letter word: work. Take on a part-time job. Start a side business. Look into dog walking in the mornings before your day job or babysitting those cute kids next door every other weekend. It’s little things like this that can really https://www.paydayloansohio.net/cities/fairfield/ help you stack extra cash fast!