Many people do not have enough money to cover an emergency fund to cover unexpected expenses. According to Bankrate’s latest financial security index survey, only 40% had $1,000 to cover an unexpected setback using their savings.
Joining us today, we have Kemberley Washington, CPA @kemcents with a few ways to help build your emergency savings:
#1 Determine where to save
First, consider where to start. Think beyond your regular bank account. Consider savings accounts that may pay a little more interest than traditional bank accounts. Nerdwallet has a great listing of online savings accounts that pay a little more than 2% on average. Financial institutions such as Barclays, Discover, and CitiBank are a few that pays near 2% at this time.
#2 Determine how much to save
Next, determine how much you can save. It doesn’t matter if you commit to a small or large amount; the key is to be consistent. Saving at least $30 per week can amount to $1,440 in one year. If you commit to saving $50 per week, it can amount to $2,400 per year. But the key is consistency. Consider automatic drafts so you can do it with little to no discipline.
#3 Determine programs that can help
Finally, if you are in a situation where you may feel it is impossible to save due to your financial situation, there could be assistance for you. There are programs such as United Way’s Individual Development Account project. This program will match the savings of a low-income individual. The goal of the program is to build wealth and reduce poverty. Participants can utilize the savings to purchase a home, vehicle, go to school, or start a business.
Participants save into an individual IDA account and make regular deposits. Upon reaching a set goal, United Way will send a check to the vendor (closing agency, dealership, college, or vendor). The match is 4 to 1. Therefore a person saving $1,500 will receive a match of $7,500. Participants must commit to saving $25 per month, attend regular financial education training, and stay enrolled in the program for at least six months. For more information, please visit the United Way’s website. If you live outside of this area, consider seeking out programs in your area.