An emergency fund is a perfect tool for handling urgent, unanticipated expenses, like car repairs, home repairs and medical appointments. When one of these expenses crops up, you can withdraw the necessary amount of savings from your emergency fund to deal with them immediately.
This withdrawal will have absolutely no impact on your ability to afford your essential expenses for the month, like your mortgage, bills, and groceries.
So, if you’ve finally started an emergency fund, you should read these tips on how to help it grow.
What Can You Do Without an Emergency Fund?
Without an emergency fund, you might panic when an emergency expense crops up because you might not have the means to address it. How can you pay? You could look into emergency loans and see whether you’re qualified to apply for one. If you are, you could send in an application and wait for your approval. With an approved personal loan, you can use the funds to address an emergency expense in a short amount of time.
Another option that you could try without an emergency fund is your credit card. If your current balance isn’t close to the limit, you could charge the additional expense to it and pay down the total later on.
How Can You Help It Grow?
Automate the Savings
Your emergency fund won’t grow bigger if you forget to make contributions on a regular basis. One way to guarantee that you contribute to the fund every single month is to automate your payments into your savings account. Setting up this payment strategy will help you stay committed to your goal, even when it’s not at the front of your mind.
Add Your Windfalls
Anytime that you receive a sudden influx of cash, whether that be with a holiday bonus, a tax return, a lottery winning or an inheritance, you should put a percentage of that cash into your emergency fund. This will give your emergency fund a boost without having to make any changes to your budget or exert any additional effort. It’s an easy way to get closer to your savings goal.
Increase Your Income
You don’t have to depend on sudden windfalls to boost your emergency fund. If you’re impatient with the rate that it’s growing, you can try to increase your income so that you can maximize your contributions.
Here are some methods that you can use to increase your income:
- Ask your employer for a raise
- Take on a second-job or side-hustle
- Sell your old items online
- Return recyclable junk for money
- Rent part of your property to generate passive income
Use a High-Yield Savings Account
Interest can be a frustrating consequence that comes with borrowing money, but an incredible boon when it comes to saving it. In a savings account, your balance can accumulate interest over time and grow bigger all on its own.
A high-yield savings account is especially good at achieving this growth — this is because it has a higher interest rate than your standard savings account. It will help your emergency savings grow larger in a shorter amount of time.
However, these types of accounts have strict requirements for applicants, Iike a minimum balance. So, you shouldn’t open one until you’re confident that you can meet the qualifications.
The bigger your emergency fund is, the better it will function as a safety net. So, follow these simple tips and help it grow!