Your emergency savings aren’t very big. You’re not sure that you have enough to cover an urgent expense that crops up out of the blue. You’re not even sure that you can cover half of an expense.
It’s clear that you need to bulk your emergency savings, and you’d like to do it quickly. How?
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Choose a Better Account
Choose a savings account that comes with more opportunities for growth. A high-yield savings account tends to come with a greater annual percentage yield (APY) than a standard savings account. The APY will typically be between 2-4%. A standard savings account will have an APY below 1% — that’s not much growth from compounding interest whatsoever.
A money market account (MMA) offers a similar APY range as a high-yield savings account. It also comes with features that are similar to a checking account, like access to a debit card and a checkbook. This can be extremely useful when it comes to your emergency fund. If your emergency savings were stored in an MMA, you could pay off an urgent expense with the help of a debit card, check or money transfer app.
Follow a Budget
Are you following a budget? If you’re not following one, you’re going to have a harder time collecting savings. Your contributions to your emergency fund are bound to be inconsistent and on the small side.
Rectify this mistake by downloading a budgeting app on your smartphone and making a personal budget right away. It’s fine if it’s a rough draft—you can adjust it as time goes on. Filling out the budgetary categories will help you organize your monthly expenses and show you how much you can afford to set aside for savings every month. The amount may surprise you.
Shrink Your Expenses
If you’d like to squeeze out more savings from your budget, you should look at your monthly expenses and see which ones you can shrink. Anything you don’t spend on the expenses can go directly into your emergency fund.
These are some small changes you can make to shrink your expenses:
- Call your internet, phone and cable providers to negotiate lower bills. You can also use bill negotiation apps to do this.
- Cancel unpaid or unnecessary subscription services.
- Change your subscription service tiers to save money. For instance, you can drop from a premium Netflix subscription to a basic one.
- Use coupons and discount codes to cut costs for grocery shopping.
- Sign up for a free prescription savings plan to get discounts on prescriptions and other medications.
Add Your Windfalls
A windfall is a large sum of money that drops into your lap. It could be a bonus from work, an inheritance from a relative or winnings from a lottery. One common windfall that people get is a tax refund after they’ve filed their taxes.
If you get a windfall any time soon, add a significant portion of it to your emergency fund. That should help you reach your savings goal earlier than expected.
Make Some Sales
When you’re doing your spring cleaning this year, resist the urge to throw your “junk” in the trash. If your unwanted items are still in good condition, you can sell them online and use the profits to quickly bulk up your emergency fund. You can do this with old clothes, furniture, electronics, jewelry, collectibles and much more.
Why Should You Bulk Up Your Savings?
You don’t want to keep your emergency fund close to empty. If you do, you’re going to find yourself in a tricky situation when an urgent expense arises. You might not have enough to cover the expense in full. You’ll have to figure out another way to pay it off.
If you’re ever in that tricky situation, you still have options. You could use your credit card, or you could go to a website like CreditFresh to apply for a personal line of credit. With a personal line of credit, you can request a withdrawal within your credit limit to help you pay off the urgent expense. Once the expense is taken care of, you can focus on making repayments through a monthly billing cycle and refilling your account. If you ever encounter another emergency like that again, you can reuse your line of credit.
Avoid tricky financial situations with the help of an emergency fund. Follow these tips and bulk up your savings now!
