If 2020 has taught us anything, it’s that we need to be prepared for everything! And one important way we can be better prepared is to have money set aside in a separate bank account for any emergencies that come up. Or like in 2020, when the world decides to turn upside down.
Haven't started an Emergency Savings Account yet and don't know where to begin? Don’t worry, we have your back! Here are some quick tips to help get your Emergency Savings off to a fast start.
- Revaluate your Budget: A big part of creating a new savings goal is to reevaluate your budget. This can allow you to see areas where you can reallocate portions of your income to use towards your savings goal. This may mean cutting back on some luxury expenses that you may not need or be utilizing anymore, cutting back on subscriptions, or even looking at getting side job you can do in your free time to earn some extra cash (that you can then save).
- Save Automatically: A great feature many clients are utilizing now is automatic transfers to split a portion of their direct deposit paychecks into a several accounts. This is a very simple and effective way to increase your savings and get you to your saving goals without even realizing it. For many, if you do not see the money in your account, you will not be tempted to spend it. If you are interested in learning more about automatic transfers, talk to your company’s HR department to see if your company offers this service, or speak with one of Monona Bank’s trusted Banking Advisors to help you set up automatic transfers into your savings account(s).
- Gradually Increase the Amount You Save: You might be thinking, "yeah, that's easier said than done!" Well, we know from working with clients that this is something you can do periodically, as well. Let’s say you get a raise, a stimulus payment, a gift, or even a bonus. Instead of depositing those funds into your checking account where you are more likely to see and spend the money, you can automatically have that money, which is probably not part of your budget anyway, deposited directly into your savings. This way you’ll never get used to having that extra spending money each month in your account, since it will be safely tucked away for an emergency.
- Plan to Cover at Least Three to Six Months in Emergency Expenses: To determine this number, look at your past year’s budget and calculate how much money you need for essential items (electricity, rent/mortgage, gas, food, personal hygiene, and insurance). Once you have a total for your monthly necessities, multiply that number by six to see how much money you will want to keep in your new Emergency Fund. It may seem like a lot of money when you get started, but you can build your fund over time, and can work with a Banking Advisor to help get you the best savings tools to reach your goal with ease.
- Keep Saving After You Reach Your Goals: Once you reach your saving goals, it’s not the time to lay off the savings gas pedal; instead, be sure to keep your savings building. You never know how long an emergency will last, or how much it may cost you. For instance, it may take longer than six months to find a job if you are laid off, or if you are hospitalized, your bills can add up quickly. By continually saving, you can relieve some of that stress.
- Consider Longer-term Savings Products Like Certificate of Deposits (CD) When you reach your new savings goal(s), consider using a portion of your Emergency Fund to open a CD. By putting your longer-term savings tool like a CD, your money can work harder for you since they usually have higher interest rates. To figure out how much of your Emergency Fund to place in a CD, calculate how much of your emergency savings won’t be used in the next year. You can use the money you don’t think you will need in the next year to open a CD.
At Monona Bank, our dedicated team of Banking Advisors are here to help you get started with creating your Emergency Savings Fund, whether it is helping you find some extra money in your budget to save or choosing the best account to grow your savings.
Don’t forget if you are a current Monona Bank client, you can even open an additional saving account online. Give us a call today at (608) 223-3000 or send us an email at firstname.lastname@example.org for more information.