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An emergency fund is one of the most important things to have to protect yourself from unexpected expenses that life can throw at you. An emergency fund is a bank account with money set aside to cover unforeseen expenses such as a car repair or a large medical bill. Many finance professionals suggest having an amount that covers three to six months’ worth of expenses in your savings account. This can help you stay in line with all your plans without stressing too much. If you are thinking about starting an emergency fund but haven’t done so, then read our best strategies to start building it.
How much should I save? The answer totally depends on your financial circumstances, but as mentioned before, it should be enough to cover three to six months’ worth of living expenses. It is usually harder in the beginning, so start small and think about the safety you can receive in the longer term. For example, you can set aside 5–10 percent of your salary each month and if that works out for you, you can increase the percentage.
Where can I keep the money? It is advised to open a separate account not related to your daily expenses account and keep your savings in the bank since keeping cash at home is not safe and it is harder to keep track of the total amount. Once you start the emergency fund, forget about this money and don’t be tempted to use it for your personal needs unless it is an emergency.
What is considered as an emergency?
Here are some of the situations where you’d need an emergency fund:
You lose your job and can look for a new one in peace as you have enough money to cover rent, groceries, bills and etc.
You or your partner unexpectedly get pregnant and with an emergency fund you will be in a better position to prepare for a baby.
Your car broke and fixing it will cost a lot.
And here are some situations that usually shouldn’t be covered by an emergency fund
Holidays and birthdays
The chance to get a great deal on something you don’t need
Expenses that aren’t surprises, such as car insurance
It is always more difficult at the beginning, but when you get used to putting aside some money, it gets much easier and becomes a habit. However, if you are still not having much luck with savings, Creditstar can always help you with extra money. We have loans for any situation, all you need to do is fill in the easy application and if approved, the money usually reaches your account within 1 day.
Keep checking our blog for more financil tips and weekly advice which will help you manage your financial status.
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