Building an emergency fund takes time and dedication, but it’s not as hard as you think! Having funds to cover large, unexpected expenses such as emergency visits, home-appliance repairs, major car fixes, and unemployment will make going through those things a lot easier. We’ll tell you the best tips on how to build an emergency fund and how much you should save.
How Much Should I Save?
This fully depends on your financial circumstance, but a good rule of thumb is to have enough to cover three to six months’ worth of living expenses. While three to six months’ worth of expenses sometimes seems like a massive amount, start small. Even having $500 saved can get you out of many financial emergencies. If you put away something now, you can build your emergency fund over time.
Where Should I Keep My Emergency Fund?
Since an emergency can strike at any time, having quick access to your emergency fund is crucial. The account should have competitive dividends and no monthly maintenance fees so you can get the most out of your savings.
RMELFCU offers multiple savings accounts that all earn competitive dividends, have no monthly maintenance fee, unlimited deposits, free digital banking, and more! Having a savings account with a credit union ensures you have access to your money when you need it and are earning benefits with it when you don’t.
Another, less liquid option, is an RMLEFCU share certificate. With these accounts, you deposit a certain amount, set your term length, and wait! You’ll earn competitive dividends at fixed rates that are higher than regular savings accounts. Keep in mind, the longer the term, the higher the rates. Early withdrawals are subject to penalties, so only use this option if you already have a set amount set aside for emergencies elsewhere to get you out of a pinch and are looking to build your already existing emergency fund faster.
How Do I Save?
So, how do you get up to that three to six month goal? For a lot of people, this might seem like an enormous goal that will take years to reach and you might get disheartened along the way. Instead, a great way to start is to set a goal that is more reasonable and much smaller.
As mentioned above, an initial emergency fund of $250 or $500 is much more palatable and reaching those goals will make you feel accomplished and urge you to save more! Breaking down that emergency fund goal into even smaller pieces, like $25 dollars a week can make it even easier, and you can make those into automatic transfers, so you don’t even know the money is going to your savings!
If you save like this, you’ll realize quickly you’ve hit your first emergency fund milestone, and that will feel GREAT! Your account will start earning interest or dividends and you can continue the cycle by setting another easy-to-reach goal and you watch your emergency fund grow. Before you know it, you’ll reach that three to six month emergency fund and have it stashed away so your life isn’t disrupted by these kinds of inconveniences.
If you have any questions about RMLEFCU’s savings accounts or would like to open one in minutes, visit www.rmlefcu.org or give us a call at 303-458-6660. We would also love to see you in person! Find a branch near you.