Living through a pandemic has reminded us of the importance of having emergency savings. Life can be unpredictable and a financial safety net can be useful, and in some cases, even lifesaving. However, many people find it difficult to create and maintain such savings. Here’s a few tips to make the process easier:
1. Define your goal
Setting a defined goal gives you something concrete to work towards, which increases your chances of success. Emergencies vary in how they impact your finances, but it is generally agreed that your emergency fund should hold six months’ worth of your living expenses.
2. Build it up gradually
One of the reasons people fail to sustain their emergency funds is feeling overwhelmed by the undertaking. The target amount may feel unattainable, but remember, it can be spread over several months. If you save whatever small amounts you have consistently, you will be able to attain your goals eventually.
3. Build some discipline
Strength of will is necessary to create and maintain your rainy day fund. Save for it regularly and diligently. In addition, do not touch these savings in all but the direst of emergencies. Lastly, work towards replenishing any amounts you spend as soon as you get back on your feet.
4. Keep it accessible
The essence of a rainy day fund is to help you cover your financial needs in the event of an emergency. Thus, you should keep it in a high-yielding account that is easily accessible. Ideally, the withdrawal process should be quick and free. This way, the funds will be able to serve you when you need them most and you are still able to earn a return.
In conclusion, building emergency savings is difficult but not impossible. By defining your goals, starting small, having some discipline and staying liquid, you will build enough of a nest egg to sustain you in a financial emergency.
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