How to Build Your Emergency Fund
Find realistic tips for starting your emergency savings so you're prepared for the unexpected
An emergency fund is only effective when it contains enough funds to sustain you through relatively serious emergencies. Building an emergency fund can seem daunting when you think of the total amount of money you would need to save. But, saving bit by bit will eventually lead you to an emergency fund that's a comfortable safety net for you.
Why do I need an emergency fund in the first place?
Before you start building your savings, think ahead and picture the types of things you're saving for. Emergency funds are necessary in the event of a job loss, unexpected medical issues with large bills, major home repairs, supporting children who are in financial trouble, and many other reasons. Thinking ahead can help you put your emergency savings goals in perspective. If you had to face any of these scenarios, you would want a substantial amount of money at your disposal. Read on to learn where to start.
Which expenses should I account for in my emergency fund?
The standard advice is to save between six and nine months of total living expenses, but this can vary depending on your situation. When determining how much you should save, start by making a list of your projected expenses and go from there. To keep it manageable, think about two primary groups:
- Groceries: Gather your receipts for a month to get an accurate picture of how much you spend on food and drinks. If you've never been one to make a list and stick to it, consider doing that for a while to see if you can trim your spending. That would probably be necessary in the event you were dipping into your emergency fund.
- Housing: Add up your rent or mortgage, insurance, utility bills, taxes and any bills you may still be paying for previous home repairs. You may also want to bump this number up a little to account for future repairs.
- Vehicle or public transit: While you hopefully don't live in your car, it's a form of shelter you'll want to retain through a rough financial patch, so prepare for this. Factor in monthly payments, gas, insurance, oil changes, parking expenses and maintenance like replacing tires, air filters and other components. If you ride public transit, include the cost of your monthly pass in your emergency savings.
- Personal & household expenses: You should also budget for personal expenses that may be unavoidable, like toiletries, household cleaning supplies, haircuts, new glasses and other similar purchases.
Start building your emergency fund
Once you've made this list and gotten a sense of the total sum you need to save, open a separate savings account dedicated only to emergencies. Then, figure out reasonable monthly contributions so you can still meet your other obligations. Consider setting up automatic deposits so you don't forget about your goal or decide to spend the money elsewhere.
Open your emergency fund with Citizens Bank
You can choose from one of our many high-interest savings accounts to start your emergency fund today. If you have any additional questions about our account offerings, don't hesitate to contact a Citizens Bank customer care representative at 1-877-360-2472.