How to create an emergency fund
There are some things we don't bargain for in life that just happen, this is why it is very necessary to have an emergency fund.
There are some things we don't bargain for in life that just happen, this is why it is very necessary to have an emergency fund. It is meant to serve as a soft landing when there is a financial shortfall during unexpected situations.
Here are ways to build up your emergency savings
1. Track your income and expenses
Keep tab of how much you make and how much you spend monthly.
Having an idea of how you spend your salary monthly gives you a break down of how much you would need for your emergency fund and the amount you can put into it monthly.
2. Set a target
Ideally, an emergency fund should have an accumulated sum of at least four to six months of a person's monthly income. Set a target for yourself to achieve this goal.
Decide how long it will take you to get to your target based on how you save monthly.
Also, come up with a plan to commence your saving process. Having a plan and setting goals is a perfect combination to have a functioning emergency fund.
3. Use loose change
If you transact mostly in cash, this works well. At the end of every day's job, empty your pocket for spare change and put them in a jar. When it's month's end, empty the jar filled with spare change and add it to your emergency savings.
It is a good way to boost your funds.
Also, cut down on some things that you don't necessarily have to waste money on. Boost your money from all the extra money you can get.
ALSO READ: Why you need a budget
4. Put your fund where it's easy to access
A savings account is the best place to put an emergency fund. So you won't have any problem when you need the money.
You need to also make saving into an emergency savings account automatic. Plan regular payments every month from your salary account to your emergency fund, using your bank's automatic transfer payment plans. It makes it easier to save for emergency when you actually forget to do so at the end of every month.
5. Follow through with your plan
You already have your plan and strategy all set, now the bigger task is to follow through with it because it is the hardest part of setting financial goals.
With a simple and realistic financial goal, it is way easy to stick to it.
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