A Guide for Building an Emergency Fund

05/02/2022

A Guide for Building an Emergency Fund

Preparing for the unpredictable can be a hard task to conquer. Afterall, most emergencies are unexpected and can materialize seemingly out of nowhere. Whether it’s sudden medical expenses, car or appliance repairs, or loss of income, it’s not always comfortable to dwell on what could go wrong. However, if you’ve financially prepared for an unforeseen circumstance, the situation often becomes more manageable, and you can recover much quicker. To help you get started, we’ve outlined a quick guide for how build your emergency fund.

Step 1 – Determine A Goal

It’s hard to start saving if you don’t have a goal in mind. First, you must determine an appropriate amount to keep in your emergency fund. As a general rule of thumb, aim to save at least three to six months’ worth of expenses. This total will depend on many factors, such as your income, current costs, and lifestyle. If the end amount feels too daunting to begin with, start with a smaller, more doable goal, such as several weeks or one month’s worth of income. Then, once you’ve reached your smaller goal, you can continue to save towards your overall goal.

Step 2 – Make It A Habit

Once you’ve determined your savings goal, you must decide how much you’d like to contribute at regular intervals. This amount should be obtainable on a weekly or monthly basis and should remain a steady part of your routine. Automating your savings is a great way to ensure consistency. With Valley’s Rewards Savings, your rewards auto-transfer to your savings account, so you are building your savings effortlessly!

It's also important to make sure your emergency savings are easily accessible, so you have no trouble retrieving funds if and when you need them. Valley’s online and mobile banking allows you to view your account(s) whenever and wherever you’d like.

Step 3 – Set Guidelines

There are “emergencies” and then there are EMERGENCIES. Set guidelines so you know when it’s appropriate to tap into your funds. This ensures that you have funds available in case of extreme occasions. While an older or slower computer may be inconvenient, as long as it can still function, it’s best to start saving separately rather than take any resources from your emergency fund. Reserve these funds for unexpected and severe circumstances, such as a medical emergency or car accident.

Step 4 – Monitor Over Time

After you’ve built a comfortable emergency fund, it can become easy to forget, especially if it remains untouched for many years. However, even if you don’t need to make use of your funds, it’s necessary to adjust your savings from time to time. Any big lifestyle or income changes, such as having children or pay increases, will impact the effectiveness of your emergency fund. While your funds may offer a secure financial cushion right now, they may not remain sufficient years from now.

With these steps in mind, you’re well on your way to building a healthy and obtainable emergency fund. If you’d like to learn more about Valley Credit Union’s savings options, visit our Personal Savings page or swing by Valley’s nearest branch today.

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