Do you have money set aside in case of an illness, accident or disaster? I've partnered with Allstate to talk about why you need an emergency fund and how to start one. Plus, I've got a free printable savings tracker so you get and stay motivated to build your emergency fund.
It's important for every family to have an emergency fund. Even singles or married couples with no kids can benefit from having a stockpile of money to use in unexpected situations. You never know when you or your child may get sick or some other emergency expense will arise. What happens if a driver cuts you off and you swerve into a curb and both of your tires pop? Your insurance deductible might be over $500. Or, what if your hot water heater explodes and damages your home? Now you need a new hot water heater and new flooring. Do you have that kind of money laying around?
If you are living on a budget, having an emergency backup fund is extremely important. Let’s take a look at the why’s of building an emergency fund before getting into the how’s.
4 Benefits of Building an Emergency Fund
1. Keeps you from having more debt – If you have a sudden car repair or medical bill, your emergency fund will protect your bank account. With the money you have saved, you can pay the bill without whipping out your credit card, thus creating more debt for your family.
2. Lowers your monthly expenses – With an emergency fund, you can pay a medical bill or other large statement without having to set up a payment plan. This keeps your month-to-month costs low, since no added expenses (and added interest) are tacked onto the budget.
3. Gives you financial peace – There isn’t as much worry about money if you have an emergency fund built up. When you need to replace a tire on your vehicle, you can simply pull $150 out of your emergency account rather than stress about where the money is going to come from. It’s like having a buffer against the unexpected!
4. Protects your family – Not only will you be keeping your bank account safe from unexpected situations, you can also protect your family with an emergency fund. With this stash of cash, you can get your child the medications he needs for a sinus infection without batting an eye. You could also replace your daughter’s car seat once she outgrows her old one. Little things like this keep everyone protected from day-to-day dangers.
How to Start an Emergency Fund
In order to build a sufficient emergency fund for your family, you should decide exactly how much money you need to put back. The amount recommended by most experts is $1,000. However, in line with Dave Ramsey's teachings, I would suggest you add up your living expenses, and make sure you have 3-6 times worth that amount in the fund.
There are several ways you can build your emergency fund – and do it quickly. It shouldn’t take you more than one year to stock your fund with the money necessary to protect your family from unforeseen circumstances.
Printable Savings Tracker
Click HERE to print the full size PDF Printable Savings Tracker
This printable savings tracker will help you stay motivated and organized when building your emergency fund. Record every deposit you make into the fund, and keep a running balance. The visual progress tracker can be shaded in as you build your emergency fund, to help you continue your progress! Note the ⅓ and ⅔ amounts on the lines beside the bar, then shade it in with each deposit.
5 Ways to Build your Emergency Fund Fast
Here are a few ways you can put money into the fund so it gets fully stocked quickly:
1.) Get a part-time job: Just a few hours a week can be enough to put more into your emergency fund each week. You could also harness your talents with these crafts to make and sell.
2.) Sell unused belongings: Clean out closets, the attic, and the basement. Hold a garage sale or list your items you no longer need on swap sites or selling sites. Put the profits into your emergency fund.
3.) Cut back on expenses: Eliminate some of the unnecessary costs in your monthly budget, including eating out, Starbucks coffees, and purchasing lottery tickets. Instead, put these amounts toward the fund.
4.) Use a zero-balance budget: Rather than leaving a few hundred dollars in your bank account at the end of each month, move it into your emergency fund. Leave yourself with a zero balance that will start over at the beginning of each new month.
5.) Save your change: Anytime you use cash for a purchase, put the coins you receive in a jar. Deposit the money into your emergency fund once the jar is full. Also, check with your bank to see if they have a "keep the change" program where they round up your debit purchases to the nearest dollar and transfer that change into a savings account.
Additional Tips about your Emergency Fund
To be successful with your emergency fund, you must understand what constitutes a true emergency. You don’t want to waste your fund on purchases that aren’t extremely necessary.
Your emergency fund is not for: concert tickets that just went on sale, birthday or holiday gifts, costs that aren’t surprises, like a vehicle tag renewal. The emergency fund is also not for any “just because” purchase.
However, your emergency fund can cover unexpected expenses such as: car repair, job loss, medical bills, home damage, emergency pet care, or sudden dental work.
Where to keep your emergency fund.
Some people may wonder where to keep their emergency fund, in order to have access to it without spending it. That is really a decision for you and your family. Some keep cash in a fireproof safe, so they can get to it as needed. Others open a savings account with their bank dedicated to the emergency fund. That way, the money is a little more difficult to access, and gives you time to stop and think about using the money before you just spend it.
I hope you put our printable savings tracker to good use to start building your emergency fund!
This post was written as part of the Allstate Influencer Program and sponsored by Allstate. All opinions are mine. As the nation’s largest publicly held personal lines insurer, Allstate is dedicated not only to protecting what matters most–but to guiding people to live the Good Life, every day.