The recent gas shortage here in the southeast left many scrambling to fill their tanks just in case the supply of gasoline to stations in our area became depleted. That’s not a good feeling. It reminded us of the importance of establishing an emergency fund too. Think about it. You can’t stock pile gasoline in case a crisis occurs, but you can build a healthy savings in case of emergency.
Here are our top 3 ways to grow an emergency fund:
Decide How Much You Need
Most financial advisors will tell you the ideal emergency savings goal would be to save as little as three months or as much as two years of expenses, but it depends on your personal situation. Having other assets and additional household income (from a spouse’s wages, child support, etc.) as well as job security and even comfort level contribute to the amount you may need to cover your necessary expenses.
Figure out Where You’d Like to Put It
There are various types of accounts you could put your money in – general savings accounts, money market accounts, even short-term certificates. A general savings account usually means a lower interest rate whereas a money market or short-term certificate might yield a higher interest rate.
You also want to consider your spending habits in that you might wish to save your money in an account in which you most likely won’t touch. Money Market accounts are great for that because you can only dip into them a few times a month (typically six times) due to federal regulations and bank policies. Since you know that, you are less likely to touch the fund to spend it.
When You Get Paid, Pay Yourself First!
Treat your emergency savings account like a bill. Not only have it categorized that way in your budget, pay it first before all others. That way, it’s out of sight and out of mind. Meaning that because that money has already been set aside, you won’t even consider spending it.
There are many other ways to grow your emergency fund. Start with these three suggestions first and build on it from there. That said, if you have suggestions, please share in the comments below!