Create an emergency fund with these tips

We generally make money when you get a product (like a credit card or loan) through our platform, but we don’t let that cloud our editorial opinions. Learn more about how we keep this compensation from affecting our editorial views.

Create an emergency fund with these tips

One of the more significant trends of the past two years has been the struggle of American households to save money, according to Informa Research Services. With a steady decline of disposable income due to rising mortgage costs and inability to save, hard-pressed households are finding it difficult to meet day-to-day living expenses. Most are turning to competitive Home Equity Lines of Credit (HELOC) or low credit card rates to pay off their existing debts.

Nearly half of the U.S. workforce with children under the age of eighteen manages their monthly bills by living paycheck-to-paycheck. This has turned the payday loan industry into a thriving $4.2 billion annual business. Based on a survey conducted last year by Harris Interactive, nearly 45% of adult households did not have enough in liquid savings to cover at least three months of living expenses in case of an emergency.

So you won't be caught off-guard, here are six tips you can follow to set-up your "rainy-day" emergency fund:

  • Organize your expenses - Before you can determine how much to save, you need to assess your current spending habits. Start by categorizing your monthly living expenses (e.g., mortgage, utilities, credit cards, auto loan, etc.). Next add-in your periodic costs (e.g., property taxes, homeowner or renter's insurance, annual renewal fees, etc.). Review where your spending is going and see if cuts can be made. Use Credit Karma to track your expenses all in one place. Or check to see if your bank offers a Bill Pay program to help you better manage your scheduled payments and spending, automatically.
  • Pay-off your existing credit cards - Paying off your credit cards should be your top priority before starting any savings program. The money you can save in interest payments alone far outweighs the return of any savings investment. Pay-down your highest yielding interest credit cards first. Then consolidate your more expensive loans into one card which offers a low- to zero-interest balance transfer.
  • Develop a savings goal - Determine how much you need to save each month to cover at least three to six months in living expenses. If your goal is to save 10% of your gross savings each month, and you only have 8% left over after expenses, then look at creative ways you can cut costs to make up the difference.
  • Open a liquid savings account - Keep your emergency fund separate from your regular savings or checking account. Comparison shop for a liquid savings account that offers you a competitive rate of return, like a high-yield interest savings or money market account. Some can be opened with a low minimum balance, offer additional deposits in any increment, have check writing privileges and debit card access and more.
  • Set-up automatic deposits - While funds can be added to an account at any time, consider setting up some form of automatic or systematic deposit. You determine the amount and frequency of the funds transferred, either through payroll deductions or direct transfer from another account
  • Store away additional cash -Make it a habit to deposit any unforeseen windfalls into your emergency fund. For instance, learn to put away that tax refund, company bonus or lottery winnings. Should you need to access your emergency funds, set up a repayment schedule by budgeting for the amount you've withdrawn.

Your success in building your emergency fund will come from your discipline in developing good savings habits without tapping into your fund for non-emergencies. Good luck!

Source: Informa Research Services

Editorial Note: The opinions you read here come from our editorial team. While compensation may affect which companies we write about and products we review, our marketing partners don't review, approve or endorse our editorial content. Our content is accurate (to the best of our knowledge) when we initially post it, but we don't guarantee the accuracy or completeness of the information provided. You can visit the company's website to get complete details about a product. See an error in an article? Use this form to report it to our editorial team. For questions about your Credit Karma account, please submit a help request to our support team.

Advertiser Disclosure: We think it's important for you to understand how we make money. It's pretty simple, actually. The offers for financial products you see on our platform come from companies who pay us. The money we make helps us give you access to free credit scores and reports and helps us create our other great tools and educational materials.

Compensation may factor into how and where products appear on our platform (and in what order). But since we generally make money when you find an offer you like and get, we try to show you offers we think are a good match for you. That's why we provide features like your Approval Odds and savings estimates.

Of course, the offers on our platform don't represent all financial products out there, but our goal is to show you as many great options as we can.

All Comments

Results 1-2 of 2Results per page: 5 | 10 | 25Page 1 of 1   Previous | Next
1 Contribution
0 People Helped

How do i get the emergercy fund to pay off the loan ?

8 Contributions
57 People Helped

If you have ean emergency fund you would not have a loan. I would save up $1000 for your started emergency fund. Pay off your loan and then start saving 3 to 6 months of expenses as your emergency fund. I hope that helps.

Results 1-2 of 2Results per page: 5 | 10 | 25Page 1 of 1   Previous | Next

Your Credit Scores Should Be Free. And Now They Are.

View your scores and reports anytime.


Comment on this Article

Write your comment:
Enter Your Comments