Your emergency fund isn’t much of a safety net right now. It doesn’t have a lot of savings inside of it, so you’re not confident that you can rely on it during an emergency. You’re not sure if there’s enough in it to cover an urgent, unplanned expense that falls into your lap.
If your savings aren’t enough to handle an urgent expense, you’ll have to consider an alternative payment method. You could charge the expense to one of your credit cards, as long as the transaction doesn’t push the balance too close to the limit. Or this might be an appropriate time to apply for a personal line of credit online. With a personal line of credit, you can request a withdrawal and use borrowed funds to pay off the urgent expense in a hurry. Learn more about this form of revolving credit and what qualifications you need to apply for one. This information could come in handy.
You don’t have to think about these different payment methods when your emergency fund is full. So, how can you fill it up and make your savings grow?
Automate Your Contributions
Your emergency fund won’t grow very quickly when you are inconsistent with your contributions. If you only add some money in whenever the mood strikes you, your balance is barely going to budge over the months.
The best way to get in the habit of contributing to your emergency fund is to use automated transfers between your checking account and savings account. Set these transfers up so that they’re triggered at the same time, every single month. This will help your emergency fund grow much faster.
Boost Your Contributions
You can make some extra room in your personal budget by eliminating unnecessary subscriptions, negotiating bills and trimming variable expenses. After making these budget cuts, you can increase your emergency fund contributions from this point forward.
Use Interest Rates
Are you keeping your emergency fund in a basic savings account? This won’t help your emergency fund grow very much. A basic savings account won’t provide much of an interest rate. It could be as low as 0.01%. An interest rate that low won’t create much passive growth at all. You won’t notice much of a difference in your balance by the end of the year.
So, why not move your emergency fund to an account that can help it grow? Open a savings account that offers a higher interest rate and put your emergency savings in there.
A high-yield savings account is a credible option. This type of savings account usually has an annual percentage yield of 2-4% (a massive improvement from 0.01%). Another option is a Money Market Account (MMA), which tends to have an APY of 2-4% as well. Moving your savings into one of these accounts could help them grow with interest at a faster rate.
Download Roundup Apps
Roundup apps are a form of fintech that will round up your transactions made through your checking account and send the remainder to a linked savings account. The contributions will be minuscule, but they will add up over time and give your emergency fund a boost.
Some mobile banking apps will offer a round-up feature. Check your mobile banking app to see whether this feature is available.
Add Your Windfalls
Any time that you get a bonus at work, a substantial tax refund from the IRS or any other windfall, you should add a portion of it to your emergency fund. A general rule of thumb is to save three to six months’ worth of expenses in your emergency fund. So, a big windfall can help you get close to that ultimate savings goal.
Follow these steps to build up the savings in your emergency fund. Soon enough, it’ll be a sturdy safety net that you can really rely on.
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