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How do I begin building an emergency savings fund?

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I keep trying to set some money aside for emergencies, but I'm not having much success. Something always seems to come up every pay period so that there's nothing left over to save. What are some simple, doable ways to get started on an emergency savings fund?
asked Jul 27, 2015 in Finance by AndreaM (20,510 points)
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4 Answers

+4 votes
 
Best answer
Building an emergency savings fund or "rainy day" fund is an excellent idea and a step in the right direction. Many individuals don't contemplate this approach to saving money and regret it later on in life. So, indeed you have made a positive decision.

To answer the query, building an emergency savings fund requires focus and determination. It is about your mindset and remaining strict with your approach towards saving money. Once your mind is in the right place, the rest becomes easy. Here are a few proven tips, which will ensure your emergency savings fund is bulging in no time.

Work On Small Percentages

Break the process down into percentages as this can make it easier to do [1]. The purpose of this process is to save a specific amount of money, which is doable in your mind based on an established percentage. An example of this would be a person earning $1000 a week putting aside 10% of this. So, $100 goes to the fund. If your pay goes up, you stick to the same rule. You still put in 10%. You will be surprised how easy things become.

Set the percentage in accordance with your  expenditures. Lower it, if you find the percentage to be taxing, if not impossible. As long as you are putting something inside, you are headed down the right path.

Remain Consistent

This fund is set up for an 'emergency' and if you have one coming up every week, it is fine to keep tapping into it. However, in most cases you are not going to face such a situation every week. Therefore, learn to be consistent and you will start to accumulate funds.

Reduce Unnecessary Expenses

There should never come a point where you are earning a good living and still unable to save a penny. You have to sit down and cut unnecessary expenses. Focus on your needs, not your wants. Things like a new plasma TV or going shopping for clothes is not necessary. Take out these expenses and save the money.

This should assist you in your goals. Hope you are able to save a lot of money using these tips!

References

1. https://www.cibc.com/ca/advice-centre/family-finances/emergency-savings-fund.html
answered Jul 27, 2015 by kingusama92 (23,380 points)
selected Jul 29, 2015 by AndreaM
+3 votes

Saving for emergencies is so important because you never know when they'll occur! I think one of the best ways to start saving is to act like it is a bill that you have to pay. If you think of it as something that is optional, you may not put money in the account for the fund. However, if you think of it as something that you have no choice but to pay, you can start collecting a lot of money in just a few months.

Another great thing to do is start collecting all of your spare change in a jar. As soon as the jar fills up, take it to the bank, have them transfer it to cash and then deposit it directly into your account. You'll have more money saved for emergencies in no time, especially if you often have a lot of change in your pockets and lying around the home.

Reference:

http://www.bankrate.com/finance/savings/5-ways-to-grow-an-emergency-fund-4.aspx

answered Jul 28, 2015 by AmyLynn (20,980 points)
+5 votes

Building an emergency fund is the first step to financial independence. First, I recommend that you read the following book, as it dishes out the advice I'm going to give you. 

 

 

I have read this book probably more than 10 times since around 1999, when a friend first introduced me to Financial Peace. In this book, it describes your emergency fund being the first step to achieve 'financial peace.' There are always going to be unexpected expenses that arise and can derail your budget. So how do you start saving your emergency fund? Simple, you abandon everything else you know about finances because it hasn't worked. Then, you simply start 'paying yourself first.' You save up 500 dollars as quickly as you can. Then, as you take on the next steps in the book, debt, bills, expenses and everything else will be discussed. 


Additionally, Dave Ramsey has published numerous other books since then, and he also has a Financial Peace seminar. Remember, saving up your emergency fund is the first step to financial independence, no matter what. Save up that 500 dollars before anything else. As you continue down your path to financial freedom, the end result of an emergency fund is three to six months worth of living expenses in a liquid cash money market account. Below is the link to Dave Ramsey's Financial Peace University, where you can find a wealth of information on this subject and other subjects in relation to personal finance. 

 

http://www.daveramsey.com/fpu

answered Jul 28, 2015 by JLettermanMB (43,520 points)
I also recommend checking out this post on my website about investing your spare change on autopilot to build an emergency fund:
http://jesseletterman.com/the-innovative-acorns-app-invests-your-spare-change-on-autopilot/
+4 votes
It may seem impossible to build an emergency fund when you seem to be spending your entire paycheck every month on expenses. However, if you think about all of the incidental things that you pay for everyday, you can probably find areas where you can save money. For example, if you buy coffee everyday, you can save about $3-5 everyday by bringing your own coffee. Multiply $5 by 5 days per week, 52 weeks per year, and you can save about $1300 every year!

That was just one example. You should first make a budget. Separate your essential fixed expenses from your variable expenses. Look at what you  typically spend on clothing, recreation, and dining outside of the home. Then, cut that by 20% every month. This will be a good initial goal toward saving for that emergency fund.



You should have your paycheck directly deposited in your regular bank account every paycheck. Open up a separate savings account just for the emergency fund. When you have figured out how much you can save, make arrangements with your bank so that when your paycheck is deposited, the amount for the emergency fund will be automatically transferred into the separate savings account. When you remove this savings amount from normal access, it will force you to spend only what is in your regular bank account for normal expenses

It seems contradictory, but if you live on a tight budget, it is more important than ever to save up for emergencies. You cannot afford NOT to save. One emergency can throw you into deep debt if you don't have an emergency fund as a cushion. Start "paying yourself first" into that emergency savings account today, even if it is just $10 a week. The earlier you start, the more time you will have to accumulate a tidy sum.

http://www.americasaves.org/for-savers/make-a-plan-how-to-save-money/saving-on-a-tight-budget
http://www.valueoptions.com/solutions/2012/02-February/story1.htm
answered Jul 29, 2015 by turker88 (23,620 points)

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