Tips to help build your emergency fund

Whether you’re a person who likes to plan or someone who takes things as they come, some things just happen unexpectedly and may cause financial strain that can be challenging for any of us to overcome. By creating a savings buffer you could feel more confident that you can support yourself and your family through tougher times.

With spending estimates for one person being $2,835 on average each month, a couple $4,118 and a family of four $5,378, many people may not have enough savings to cover even a month of expenses. And that doesn’t take rent or mortgage expenses into account. If you suddenly lost your source of income, how long could you manage on your current savings?

The unexpected can come in many forms

In addition to natural disasters, personal events such as divorce, injury or sudden loss of employment can all disrupt your personal finances. Financial difficulty can add to the stress of an already challenging time, causing tensions between family members or pressure to keep going. This can result in increasing debt, loss of assets and changes to living conditions.

Having an emergency savings fund could be one way to avoid or ease the pressure that can come with these real life situations. Here are 5 tips to help you build an emergency fund safety net.

Set up an emergency savings fund

It’s a good idea to consider keeping emergency money separate from your main bank accounts. This way you’re less likely to dip into it unnecessarily and you can easily track your progress towards your savings goal.

Crunch your cost of living numbers

Work out your current income and be realistic about essential expenses including groceries, rent or mortgage, utilities, car payments, insurance and your social life. You can then consider big-picture financial goals like saving for a holiday or a house deposit. Once you have reviewed your current financial situation, you can review your spending and budget habits to find opportunities to save and decide how much is a reasonable amount to add to your emergency fund each month.

Set reasonable goals

Don’t expect instant results. By setting reasonable goals, you’re more likely to stick to your savings goals. Having three to six months worth of expenses in your emergency fund could be a good target as this could cover your expenses if, for example, you need to find a new job or can’t work due to illness. However, the most important step you can take is just getting started.

Set up automatic transfers

Take the effort out of saving by having money moved straight into your emergency savings fund from your pay. This can be as easy as asking your employer to set up an automatic transfer to an account separate to where your pay is deposited. That way you won’t forget – and you’re not so easily tempted to spend it.

Keep the extras

Emptying loose change into a jar can be an easy way to top up savings. Once the jar is full, deposit the cash straight into your emergency savings fund account.

If you received extra bonuses at work from job well done, or had a year with a big tax refund, you may want to consider putting the extras towards your emergency savings fund account.

You never know when your life could be impacted by the unexpected. But developing savings habits and building an emergency savings fund can help you feel more in control if an emergency does strike.

Want more tips? Browse our blog articles or speak to your trusted Mortgage Broker today!

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.