44% of Americans wouldn’t be able to cover a $400 emergency expense out of pocket
. Many of us think it’ll never happen to us, so we don’t plan for it, but the reality is that an accident, medical emergency, lost job, or even an unexpected car repair can happen to any of us at any time. While we don’t like to think about these things happening, being financially prepared for the occasion can save you from becoming overburdened with debt.
What if you’re already in debt and are trying to pay it off before you start saving for an emergency? Working towards paying off debt is important, but without emergency savings, a mishap can cause you to go even further into it. It’s generally recommended by experts to keep between three to six months of your salary in an emergency savings account, however, even saving enough for a small cushion can help in a bind.
How to Build an Emergency Savings
Understanding the importance of having emergency savings is one thing, but it’s another thing entirely to start making efforts toward your goals. The big question lies in how you go about building it up when you may already be in debt or don't have a lot of extra income to spare.
You get a savings account
The first place to start with building your savings is to have a dedicated spot to put your money. Get a savings account that’s easily accessible in case there’s an emergency but be dedicated to not touching it unless that event occurs. We at Sikorsky Credit Union have several savings account options that might be beneficial to you. Click here to check them out
Have checkpoints along the way
While having a goal of saving six months’ salary sounds overwhelming at first, you can get there by accomplishing minor goals along the way. Start with trying to save $1,000. Once you reach this goal, move towards the next small goal until you work your way towards your ultimate goal of six months’ salary.
Don't feel as if you have to put away hundreds of dollars each paycheck towards emergency savings. Commit to putting a small amount in each week and it will build up over time. Even an additional $10 each week can make a significant impact.
Limit your spending
If you’re having difficulty trying to find any money left over to put towards your savings, start limiting your spending in one area or another and put that extra money towards your savings goal. If you’re not sure where to cut corners, start by limiting how much you go out to eat (make it no more than once per week). Other ideas include: bringing your coffee from home or taking advantage of office coffee instead of your local coffee shop, unplugging appliances when they're not in use, opening windows instead of using air conditioning, and try walking, using public transportation or riding your bike to commute instead of driving. Small changes can help you lower your spending and may give you some wiggle room to start saving.
Take advantage of great rates and rewards
When you take advantage of accounts with rewards, you can put that extra money towards your goal. For instance, with Sikorsky Credit Union’s Kasasa Cash or Kasasa Cash Back Free Checking accounts
, you could be rewarded by earning a high dividend on your account or receive cash back, which you can put towards your savings. (For more information about our free checking accounts that earn rewards, please click here.
Tepper, T. (2019). Most Americans Don't Have Enough Savings To Cover A $1K Emergency | Bankrate.com
. [online] Bankrate. Available at: https://www.bankrate.com/banking/savings/financial-security-0118/ [Accessed 10 Jun. 2019].
If an emergency were to happen, would you have the savings to cover it? If you said no, you’re not alone. In fact,