Why you should have an emergency fund
You might just be the luckiest person on Earth if you go through life without ever running into a situation that requires immediate and unexpected access to money. In these events, it helps to have an emergency fund (a.k.a rainy day fund) to soften the financial impact in stressful periods.
Unfortunately, 1 in 3 Australians admit their current spending is beyond their means and more than 50% of the population wouldn’t be able to cover the loss of income without turning to a credit card or loan. In the event of losing a job the imminent stress of rent, utility bills, food, and family related expenses can all come across as overwhelming burdens.
Humorously referred to by some as a F**k Off Fund, it is generally recommended to have three to six months worth of expenses saved away in your emergency fund. This sounds difficult to achieve on top of general living expenses, but the good thing about an emergency fund is that you can take time to build it up.
3 Tips for saving for an emergency fund:
Save in small steps
There’s an English proverb that says ‘beware the beginning’. Small steps don’t seem like much in the beginning but there’s no limit in the end!
The key is saving regularly. $2-5 a day doesn’t seem like much, but add it up and you can see $730-$1825 stashed away in savings in 1 year.
Automate your savings
Scheduling automated deposits into your savings account removes emotion and self-discipline from saving. Setting up an automatic transaction on the same day you get paid will whisk the money out of your spending account before you have the chance to spend it.
Use a good old piggy bank
Why not have a bit of fun by conjuring up some childhood nostalgia and getting an actual piggy bank to put away loose change? You can even gamify the experience – say every time you’re late to an event put away $1 into your savings. Once you fill it up, you can pour it into your Emergency fund.
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