Building an emergency fund can feel overwhelming, especially when you’re balancing everyday expenses and long-term financial goals. But having money set aside for the unexpected, whether it’s a car repair, medical bill, or temporary loss of income, can provide peace of mind and help you avoid relying on credit when surprises happen. In this guide, we’ll cover the basics of emergency savings, including how much to save, where to keep your funds, and simple steps to start building your safety net today.

What is an Emergency Fund? 

An emergency fund is a type of savings account that can be used for life’s unexpected challenges. When individuals are faced with loss of a job, a health crisis, or other unexpected mishaps, etc., having an emergency fund can provide peace of mind.

Where Do You Keep an Emergency Fund? 

There are three great account options for an emergency fund – a high yield savings account, a money market account, or a savings account. For quicker access in the case of emergencies, individuals may want to use a money market account that has a debit card linked to it.

How Much Should You Save in an Emergency Fund? 

How much you save will vairy from person to person depending on your expenses, income, and individual circumstances. An emergency fund is typically based on the amount of monthly expenses multiplied by a period of time.

When creating your emergency fund, it is recommended to create a plan based on essential monthly expenses, including the costs of housing, utilities, food, debt payments, insurance, and transportation.

Simple Steps to Start Saving 

Step 1: Track Your Expenses

The best way to start your emergency fund, is to track all your monthly expenses – even small purchases such as a morning coffee. Not only can this help you better understand your spending habits, but it may also help to build a more realistic emergency fund.

Now is also a great time to track your debts and liabilities. This can feel overwhelming but the process of understanding those liabilities is an essential step in building financial security. The FDIC Money Smart Program offers tips, games and resources for people looking to enhance their financial skills.

Step Two: Define Your Goals

The next step in creating an emergency fund is defining your goals. These goals can range from financial safety to saving up for a vacation or new bike. Ideally, you want to plan for about three to six months of life expenses as a safety net.

You may want to start by asking yourself:

• What are my non-negotiable expenses?

• How stable is primary source of income?

• What are my biggest financial liabilities?

• What are my current safety net and back-up options?

• Where can I cut back on expenses in a time of crisis?

Step 3: Start Saving

Starting an emergency fund can be overwhelming to individuals who are struggling financially so it is recommended to save in phases. For example, phase 1 can be simply opening an account. Even saving $10 helps you define yourself as a saver.

Then phases 2 and 3 can be customized to save towards a specific amount or monthly expense.

Having an emergency fund is not about perfection but rather progress and consistency. You may need to be flexible if you experience some unexpected expenses during your saving time. Remember that you can always adapt and reassess each month when necessary.

 

How Can Partners Bank Help?

Residents of Maine and New Hampshire may want to start an emergency fund in a Partners Money Savings Account, which includes:

• No monthly charge

• No Minimum balance to open.

• Includes tiered rate and free online and mobile banking.

When opening a new savings account, Partners Bank is here to help. Individuals can call or visit their local branch to talk with a Partner’s Bank manager about their savings goals.