No one can predict the future, but an emergency savings account can help you deal with unexpected expenses and events. Job loss, illness or injury, car and home repairs are just a few of life's surprises we all face at one time or another.
A rainy day fund can help get you through these rough patches with less stress and less financial hardship.
Emergency savings fast facts:
Set a goal of saving three to six months' worth of living expenses in case of unexpected expenses
Create a budget and figure out where you can cut back to save more money faster
Once you've paid off a debt, continue paying that amount to your emergency savings account
Save any bonuses or refunds that you don't need to spend
How much emergency savings should you have in your rainy day fund?
Most experts agree that you should have three to six months' worth of living expenses stashed away in emergency savings. Obviously, the more you have saved, the more secure you'll be.
Save a little, save a lot
It's amazing how a little savings every day can really add up. Skip your daily grab-and-go breakfast, and you could have an extra $1,000 in your rainy day fund in just one year! At the end of the day, put all your change in a jar by the front door and guess what? You could have close to $200 at the end of the year. Get more ideas on ways to save money every day.
Make saving money automatic
The importance of saving money is a real "no-brainer," and with automatic deductions from your checking account to your savings account, it's easy! Many banks provide this service free of charge. All you have to do is set the amount you want transferred each month and watch your emergency savings grow.
Get a bonus or tax refund? Save it, don't spend it
Unless you really need that extra money for something essential, put it immediately in your rainy day fund. It's a fast, easy way to build your emergency savings.
Just paid off a major purchase? Keep making the payment, but put it in savings
If you just finished paying off a loan for a car, living room furniture set or other major expense, redirect that payment into your rainy day fund. You've lived without that money for a while now, so you won't miss it. But you'll feel great as your emergency savings account grows and your money worries shrink.