You’ve started building an emergency fund this year. It’s still on the small side, but you’re confident that it can get you through a small surprise expense without breaking a sweat. That’s a great first step to have taken for your financial stability. After all, it’s better to have a small emergency fund than to have no emergency fund at all!
If you’d like to make your emergency fund even better, these are some simple tips that you should follow.
Boost the Interest Rate
You can help your emergency fund grow faster with interest. A basic savings account tends to have an interest rate of less than 1% (sometimes, as low as 0.01%). In comparison, a high-yield savings account can offer an annual percentage yield as high as 5%.
If you want to help your emergency fund’s balance grow over time, you should think about moving it into a high-yield savings account to take advantage of this rate increase.
Set Up Alerts
With the help of your mobile banking app or your online bank account, you can set up a “low balance alert” on the savings account where you’re storing your emergency fund. The banking alert will let you know when the savings sitting inside of your emergency fund are too low and need replenishing. This could happen after you’ve made a large withdrawal to cover an emergency expense.
Without a mobile alert, you might not realize that you can’t rely on your emergency fund to cover a new emergency expense. You’ll have to consider a different payment solution, like a personal line of credit. You can go to the website Fora Credit to apply for an online personal line of credit — as long as you meet all of the qualifications, of course. If your application gets approved, you can use the credit tool to handle your emergency.
A personal line of credit should only be used as a backup plan when you don’t have enough savings available. It should never be considered your first solution when you’re facing an emergency expense.
Use a Budgeting App
A budget can help you organize all your expenses for the month — this includes the contributions to your emergency fund. Your emergency fund contributions should be considered an essential budgeting category. It should take priority over non-essentials like online streaming services and hobby spending.
To start your budget, you should download one of the top budgeting apps and follow the instructions. Budgeting apps will offer more perks than a basic budgeting spreadsheet. For instance, budgeting apps will sync with your bank accounts, which means that you won’t have to make estimates about your income, your spending, or your current account balances. You’ll have that information streamlined through the app. This can help you track your expenses and determine whether they are actually necessary. If you decide the expenses aren’t necessary, you should eliminate them and put the savings toward your emergency fund.
Automate Payments
After you’ve used your budgeting app to determine how much you can afford to dedicate to your emergency fund every single month, you will want to make sure that you actually put that money into the savings account. The commitment could easily slip your mind, leaving your emergency fund stagnant for months at a time.
You can force yourself to stick to this financial commitment by automating transfers between your checking account and savings account every month. It’s an effective banking tool that will guarantee that you don’t forget to make payments. You will contribute to your emergency fund and help it grow.
These are simple changes that can help you upgrade your emergency fund. Soon, your fund will be bigger and better than ever.
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