Sense & Centsibility Blog
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Why Everyone Needs an Emergency Fund and How to Get Started

Have you heard that you should have a savings equal to at least three to six months of expenses for emergencies? It’s a great goal to aim for because layoffs, injuries, medical expenses and reduced income (i.e., bumps on the road of  life) happen.

If you feel like there’s no money left at the end of the month, then saving thousands of dollars may sound impossible. While you should absolutely try to save up, there are realistic savings goals that can help you get started right away. Why? Because too many Americans don’t have enough in savings to cover even a $400 expense. This is what can lead to debt or increased debt. Sometimes it even means having to choose between which bills you can afford to pay.

Here are some simple steps you can take to get started or to continue with your savings goal.

1. Make a savings goal and write it down

Even if it is on a sticky note in your home office, at work or in your car — wherever — write down your goal. When it is on your mind, you are more likely to make it happen. It can sometimes even prevent you from buying things you don’t need. Your inner voice may say, “Yes, I really want that [insert non-necessity item here], but I haven’t reached my savings goal yet, so I’m not going to buy it right now.” Seriously, it happens!

2. Find that extra money to save (It’s there, I promise!)

Go through your budget and find at least one expense that you can either reduce or cut out completely. Think about things that are nice to have, but you don’t actually need. For example, do you need to get a fancy coffee drink from the coffee shop several times a week?

If you’re spending $5 a trip 3 times/week, you could be saving $60 a month, or $720 a year. Bring coffee from home or buy a flavored creamer to put in the bland coffee at work. If you don’t drink coffee like me, can you cut out Netflix, reduce your cable or cell bill or bring lunch more often? These are just a handful ideas, but you need to find what you can realistically cut or reduce.

3. Make it automatic

Most employers encourage automatic paycheck deposits into your checking account. Set up one into your checking and another smaller amount into a separate savings account. Try to aim for $25 or $50 each paycheck, but if that is too much, then pick an affordable amount for you; every little bit helps. This makes building up savings so much easier! I’ve been doing this for about twenty years now, and it has saved me having to take on debt for a water heater, dryer, two plumber bills, two emergency vet visits, three or four car repairs, etc.

4. Make it more difficult to withdraw savings funds

While we all appreciate the ease and convenience of mobile banking, it can also be tempting to use the money you have set aside in your savings fund for non-emergencies. I’ve done it, too, so am definitely not judging.

I have two savings accounts, and one is easily visible in my banking app. I’ve used those funds for concert tickets or other non-necessities. I have another account that is in a separate account with a credit union. While there is a mobile app, it is not associated with the account where I pay all my bills, so it’s out of sight and out of mind. That means I don’t touch that account unless there’s an actual emergency.

5. Save your change

Get a jar and start putting your change in it, or search for apps that round up your purchases to the next dollar and puts it into savings for you. (Watch out for hidden fees, and be sure it’s a safe app, though.) While you may think this could take forever to build up, you’d be surprised. I’ve saved for non-emergency goals before; it took me about four to five months to save up for a tattoo, which is not cheap.

Thinking about finances may not sound fun. But what’s even less fun is struggling to come up with enough money to pay for a broken refrigerator or being forced to use credit for an emergency. Being proactive now will be a big help down the road.

If you are having trouble figuring out your budget to set aside savings, or you feel like debt is holding you back from saving, LSS Financial Counseling can help. Call us at 888.577.2227, or Get Started Online with your free, confidential financial counseling session. Take charge of your finances today.

Author Elaina Johannessen is a Program Director with LSS Financial Counseling.