You like to save for the things you value and enjoy, but could you support yourself if your household income was significantly reduced? An emergency savings is the foundation you need to establish before you start saving for the things you want.
Establish a Safety Net and Avoid Debt
Life events usually happen when you least expect them to. Set a monthly savings goal that ensures your financial stability. By having an emergency fund in place, you avoid borrowing high interest debt if you need to replace a furnace, fix your car, or have an unexpected medical bill. Your future (and peace of mind) counts on having a safety net.
Have a goal of covering at least 3 months of your monthly expenses in a separate account that can’t be accessed easily. Continue to build your emergency savings until you are able to cover 6 months of expenses if the worst were to happen. You can feel good about saving for the fun stuff when you know you could handle an unplanned expense.
Our Personal Finance money management tool has a dedicated Goals feature that can help you make emergency savings your first priority.
7 Easy Steps to Building an Emergency Savings:
- Calculate 3 months of monthly expenses
- Set a monthly savings goal
- Deposit your savings goal directly from your paycheck
- Limit your access to that account
- If you get a raise or additional income, re-evaluate and update your monthly savings goal
- Save your tax return or bonuses if possible
- Draw a clear line between emergencies and everything else
Have questions or looking for a little help with your emergency savings plan? Lesley Warn, Financial Wellness Coach is available to chat about all things money management. Get in touch with Lesley.