You’ve heard the saying “saving for a rainy day” plenty of times but sadly that rainy day is actually the vacation we decided to take a few months ago or when you went over your weekly budget. Our rainy day savings funds are meant to cover emergencies but these days it’s hard to build one that will cover more than just one emergency.
Mint.com has some good advice on why you need an emergency fund and how much you should have stashed away; we’re here to tell you how to get one going.
First off you need an emergency fund to cover small and big emergencies, whether it is a $500 car repair or two months of unexpected unemployment. You should be preparing for any emergency that comes your way. A 2011 survey by the National Foundation for Credit Counseling found that Americans are not prepared to handle an emergency that costs $1,000.
Naturally you’re wondering, “Well, how much am I supposed to have?” Mint suggests anywhere between three to six months worth of income. If you make $2,000 per month then you need between $6,000 and $12,000 in your emergency fund. Before you start panicking though keep in mind that something is better than nothing. These are suggested amounts and just because you don’t have it now doesn’t mean you can’t work on building up to it.
In previous posts we’ve covered how to make a family budget which can help you figure out where to trim costs so you can set aside more savings. You might also want to set up an automatic bank transfer; every payday request that your bank automatically move $20, $5, or whatever amount you feel comfortable with into your savings account. You could also try another popular method we’ve seen on Pinterest deemed the 52 week challenge. Each week you save the number of weeks we are into; for example, during week 3 you save $3 and then on week 4 save $4. After week 52 (the last week of the year) you’ll have over $1,000 saved. If you’re like us and tend to spend more at the end of the year you could even flip it; save $52 during week 1, $51 during week 2 and so on.
Don’t worry if your savings account isn’t booming at the end of the year, you’re working towards a goal which means that unless you hit the lottery it will take some time and work to reach that goal.