Setting up an emergency fund is one of the easiest ways to build financial security. Essentially a cash reserve, your emergency fund is meant for unplanned payments and lives outside of regular spending. It protects you from long-term reliance on credit cards and loans, as well as unnecessary financial worries. While its size is highly individual, even a small amount can boost your financial wellbeing.
5 strategies to build an emergency fund
Below, the Kasheesh team covers five different strategies for getting your savings started.
- Create a savings habit – The fastest method to grow your savings is to consistently put money away. Pick specific, achievable goals and a system that helps you make recurring contributions. This way, you can track your progress and celebrate your achievements.
- Manage your cash flow – If it’s on the table, talk to your creditors (such as your landlord and utility companies) to adjust the due date for your bills so they line up with your cash flow. During the weeks you have more cash, you can set some of it aside.
- Take advantage of one-time opportunities to save – While it’s tempting to spend an influx of cash, saving some of it can be highly beneficial. Try to put away a portion of your tax refund, gift cards, and bonuses to avoid sticky financial situations later on.
- Automate your savings – The easiest way to keep your savings consistent is to set up recurring transfers through your bank or credit card union. Then, add calendar reminders to check your balance – and watch your savings grow.
- Save through your employer – While there are a few ways to do this, the most common one is splitting your paychecks between your checking and savings accounts. This way, you wouldn’t be tempted to spend a paycheck as soon as it hits your bank account.