Like getting enough sleep or changing your oil, having an emergency fund is one of those things that—sooner or later—we’re all glad we took the time to get done.

Except too many of us don’t. The 2015 Federal Reserve Report on Economic Wellbeing of U.S. Households determined almost half of all Americans would have difficulty gathering $400 to deal with an emergency without using credit cards, selling something or borrowing from friends or family.

With that in mind, this article offers some tips for growing an emergency fund to help provide you some cover from life’s uncertainties.

How Much Should You Save?

That really depends on your current financial strength, but as a rule, enough money to cover three to six months’ worth of living expenses is an excellent goal.

It’s Okay to Start Small

Every little bit helps!

Few of us have $400 just lying around to earmark for “emergencies” so starting with just a dollar a day, or even $25 a month, is a great beginning.

Creating an emergency fund is a long-term endeavor. It’s okay if it takes you a year to amass the money. Beginning the habit of building the fund is what counts.

Ways to Save

If you’re like most Americans, there’s likely one or two expenses you can trim, a habit that costs you more money than you realize, or a money-saving perspective-shift just waiting to be made.

And like any great practice, once you start cutting, you’ll probably find even more opportunities to save. Before long, you may wonder why you ever thought you needed to spend so much money in the first place!

Cut Those Cords
Whether it’s cable packages you rarely use or a landline that hasn’t rung in weeks, one of the easiest ways to save money is reducing or eliminating how much we give to the cable and phone companies every month.

And speaking of phone companies, take a look at your phone bill. Are you paying for data you never use? Services you don’t need? Call your current provider and see about reducing your bill, or even better compare plans and prices and move to a provider with a better deal.

Bring Your Own
Whether it’s coffee or lunch, making it yourself can save you a lot. A $5-a-workday coffee and $10 lunch will run you over $300 each month. Even if the costs to make your own are half of that, you’ll still end up saving $1800 in a year.

Quit Cold Turkey
The average price of a pack of cigarettes is over $6.00, which means a pack-a-day habit will siphon $180 a month or $2,160 in a year. That kind of money can replace a lot of broken windows, busted water pumps, or dead refrigerators.

And don’t think you’re off the hook just because you don’t smoke. Reducing your daily consumption of sodas and snacks is good for easing your budget and your beltline.

Check Your Checking
Smartphone apps, magazine subscriptions, gym memberships. What do they all have in common? They may regularly take money from your checking account long after you stopped using them or even remember signing up for them.

Do a review of the last six months (a year would be even better) and see if there are any recurring charges you don’t recognize. Dropping even one $10/month subscription can really add up.

“Thinkin’ Lincoln” / Dollar-a-Day
More than just cutting expenses, you can also take an active hand in saving. Some people like to put every five-dollar bill they receive into a rainy-day fund. Others will save one dollar every day.

There are apps like Acorn that “round up” your debit and credit card charges to the next nearest dollar and invest that money for you as well as provide options to automatically withdraw $5 or more every week.

Does Christmas Count as an Emergency?

Some years it may feel like it, but it doesn’t. The best definition of an emergency is one that negatively impacts your health or ability to work. So all of the usual personal anniversaries, Black Friday sales, or once-in-a-lifetime deals should be paid for with anything other than emergency funds.

Where Should I Put My Emergency Fund?

Since emergencies are typically time-sensitive, the money should be easy to access, but not in the same checking account you use every day (no sense courting temptation.)

Some options include:

  • A high-yield savings account
  • Separate checking account
  • Money market
  • Mutual fund or ETF

This Is Totally Do-able

It takes time to build an emergency fund, but you’ll be smiling when your hard work pays off!

If you’re starting from zero, the idea of building up 500, a 1,000—or more—dollars might seem like a long road to travel, but don’t let that stop you. With some discipline, you’ll probably find yourself closer to that goal a lot faster than you originally thought possible.

And once you hit that goal, you can move to a higher number, or take that same habit and start saving for retirement or a house.

Whichever you choose, you’ll do so knowing that when Murphy strikes, you’ll be ready and well-funded. Looking for a good home for your emergency fund? Learn more about Northpointe Bank’s UltimateAccount today!

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