Car trouble, job loss, medical bills, home repairs. Unexpected expenses are unfortunately unavoidable. That’s why we’re offering some tips on why it’s important to expect the unexpected and financially plan for an emergency.
Why do you need an emergency savings account?
While loans and credit cards might be available, that’s not the best backup plan when things go wrong, especially if you’re already in debt. Having funds available can make a stressful situation less uncertain. As a general rule, it’s best to have 3 to 6 months’ worth of expenses saved to cover an unexpected situation. You may need more if you have more people in your household without income or are the sole provider. We understand how that might make an emergency fund seem out of reach, especially if you’re struggling financially. It’s okay to start small and work toward your larger goal over time.
Tips for Saving Like a Pro
The best way to save looks a little different for everyone, but here are a few quick tips:
Calculate How Much You Need
Prioritize your needs versus your wants. Needs are the things you can’t go without, like food, utilities, rent and necessary clothing. Wants are things that are nice to have but not required, like traveling, entertainment and eating out at restaurants frequently.
Our emergency fund calculator can help you outline your budget and determine how much income is available for monthly savings. But, be sure to reevaluate this number a few times each year or when you have a change in income or spending. If you’re able to put more toward your goal, it’s good to make it happen.
Set a Monthly Goal
Looking at a large, long-term savings goal can feel overwhelming. Set a monthly savings goal that’s within reach and make it a priority. Small achievements will add up, and you’ll be able to save effectively without feeling extra stressed by a bigger, looming number.
Automate Your Savings
Automatic transfers on pay days are a great way to help you meet your monthly goal and stay consistent. Let’s face it—saving is easiest when you don’t really have to think about it.
Save Your Unexpected Earnings
From tax returns to cash rewards, put as much of your unexpected earnings as you can in savings. This can push you past your monthly goal to reach your overall emergency savings goal faster.
Unfortunately, some emergencies are particularly costly. Keep saving regularly even if you’ve reached your overall goal. This can help you keep your emergency savings account funded if a large expense depletes it.
Building an emergency fund from scratch can be challenging. If you’re struggling to save, stop into a Purdue Federal branch. We’re here to help you with products like our Emergency Savings Account.