It’s Time to Build an Emergency Fund
Do you have an emergency fund already? If you don’t have one, this is the perfect time to change that. It’s time to build yourself an emergency fund.
Why Is It the Right Time?
First, the Federal Reserve has recently raised interest rates. The interest rate hike is supposed to encourage everyday citizens to focus on saving funds that they do have and not borrow beyond what they can afford to repay. It’s a strategy that intends to recover the economy in the wake of steep inflation and pandemic repercussions.
Second, the Federal Reserve is also anticipating a recession, which could mean that you’ll need some savings to rely on in case your employment status is negatively affected. An emergency fund could come in handy in the near future.
How Can You Build an Emergency Fund?
Check Your Budget
Check your personal budget to see how much you can reasonably afford to set aside in your emergency fund every month. You might want to adjust some of your variable expenses so that you can get more savings for your fund. The faster that you collect emergency savings, the sooner that you can rely on your fund as a financial safety net.
Open a Savings Account
Savings accounts are the best places to store your emergency savings. Why? They’re easily accessible. When you’re dealing with an emergency, you can withdraw or transfer the necessary funds from your savings account right away. You don’t have to wait to cover an expense.
You won’t get this ease of accessibility with other types of saving options, like certificates of deposit (CDs). With a CD, you can only access the funds after the investment has officially matured. This could be after a month, a year or a decade — it depends on the terms you set when you opened the account. If you want to make a withdrawal early, you will have to deal with an early withdrawal penalty.
Savings accounts also have interest rates that will help your emergency savings grow over time. Since interest rates are getting higher, you’ll benefit from this feature now more than ever.
When you only contribute once in awhile, your emergency fund won’t grow very quickly. You need to commit to regular contributions so that the fund fills up as soon as possible. To guarantee that you never forget to add money, automate your savings contributions through your online banking.
Let It Grow
The best thing that you do with your emergency fund is to leave it alone. Do not make a withdrawal unless you have to manage an urgent, unplanned expense immediately. This strategy will help your balance grow.
What if you don’t have enough in your emergency fund to manage an urgent, unplanned expense? Then, you will have to look to alternative payment options for additional help. You could use your credit card, as long as the balance on it isn’t very high.
You could also look into online loan options available in your state. So, if you live in Oklahoma City, you could check out online loans in Oklahoma and see whether you’re eligible to apply. An Oklahoma online loan could help you cover the remainder of the expense in a hurry.
There’s no time quite like the present. Start putting together an emergency fund right now!