When thinking of reasons to start a savings fund, you might imagine saving for a dream vacation, a house or another big purchase. Before you set out to accomplish those goals, it’s important to remember that you could experience an emergency this year that costs beyond your planned expenses. According to OneWest Bank’s parent company, CIT, in its 2018 Savings Survey, 48 percent of American households had an unanticipated expense related to an emergency over the past year.1
Emergencies are typically unexpected, but the costs of an emergency don’t have to surprise you. The median unexpected emergency expense is reported to be at least $2,000.2 Without a financial safety net, that kind of expense can be overwhelming, especially considering that 44 percent of Americans are currently unable to cover a $400 emergency expense.3
Building up an emergency savings fund can help you prepare to deal with expenses no matter how sudden the emergency. Whether you’re dealing with job loss, car repairs, medical troubles or something else, having access to dedicated savings may help reduce the financial stress of an emergency.
Start your emergency fund with these four steps
Putting aside money is not easy with all the expenses of daily life, but you can set yourself up for success by taking the following steps.
1. Set an attainable target goal.
Because everyone’s financial situation is a little different, how much someone can reasonably afford to save for an emergency varies. Typical advice from financial advisors is to build an emergency savings fund equal to at least three to six months’ living expenses. Choose a goal that you think is realistic because if the goal seems too ambitious, you may have trouble sticking with it.
2. Work your emergency savings plan into your overall budget.
Incorporating your emergency savings goal into your everyday financial plan can help keep you organized. Emergency savings are best kept separate from other types of savings like retirement or vacation funds so you won’t be tempted to use the money for other purposes.
3. Make saving automatic.
By setting an automatic regular deposit from a checking account or your paycheck to your savings account, you can eliminate any possibility of forgetting to save or spending your money elsewhere. Making the transfer automatic prevents you from seeing the money in your checking account and being enticed to spend it.
4. Choose a bank and account type that will support savings growth.
Shop around for an institution and account type that will reward you for saving and help the money you’ve saved grow. OneWest Bank offers savings products with interest rates that will help your emergency savings benefit long term. When considering an account, think about how you will access your funds and look into account or maintenance fees, minimum opening balance requirements, and how often the interest is compounded. If you need assistance, please contact your local branch.
It takes time to build up a healthy emergency savings fund, but simply making progress toward your goal can offer peace of mind.