How would you cope if you were faced with a financial emergency?
Would you need to resort to loans and credit options, or would you be covered?
Being able to cope with an emergency is a key part of effective money management. It can help you feel more secure about your future, and give you the freedom to pursue your other financial goals.
Ready to work on your emergency fund?
Explore some of the following ideas to help you grow your savings.
Start by clearing your debts
If you’re serious about starting an emergency fund, you need to make sure your debts are cleared first.
Making a plan for getting yourself out of debt will help you clear your credit cards, loans and other debts that are leaving you paying excess interest each month.
Pay off the maximum you can afford each month to get rid of those debt repayments that are stopping you from saving more.
Set yourself an initial target
Setting a target for your emergency fund is a good way to help you save money each month. Your initial target could be as much as $1,000, giving you a good foundation to keep adding to your savings.
But how much should an emergency fund be in total? That depends on your individual circumstances.
The rule of thumb for an emergency fund is around 3-6 months’ worth of expenses.
Once you’ve hit that target, you can set it aside, or you can continue to grow your fund so that it provides you with a sizeable asset.
Establish what counts as an emergency
When building an emergency fund, you need to decide on the kinds of things that count as an emergency.
From emergency home repairs to needing to supplement your income for a while, there are a solid list of reasons that your emergency fund can be used for.
You might need to use your emergency fund to cover you in the event of legal action. For incidents that weren’t your fault, such as a car accident, you can use car accident attorneys ready to serve you to help you get compensation, without having to dip into your emergency fund.
Having the right insurance policy can also give you added protection, so make sure you have all the insurance you need.
Grow your other savings and investments
As well as your emergency fund, you should work on having additional savings accounts to cover different things.
Short-term savings accounts can help you save for home improvements, vacations and other things, and you can also begin investment accounts to help plan for your future.
Having multiple savings pots behind you can help you feel more confident in your finances, and make sure you’re covered for all of life’s events.
Growing your emergency fund can help you feel prepared for anything, and means your finances won’t take a hit if you need to source a lot of money in a hurry.
Work towards building your initial target, and see how far you can go to growing your emergency fund.
(Disclaimer: This content is a partnered post. This material is provided as news and general information. It should not be construed as an endorsement of any investment service. The opinions expressed are the personal views and experience of the author, and no recommendation is made.)