An emergency fund is a kind of bank account with the help of which money is set aside to cover a considerable, unexpected expense, such as unforeseen medical expenses, home appliance repairing, and significant car fixes. In the emergency funds, a financial buffer is created, which can keep the borrower afloat in the time of necessity, and in such case, you will not be required to take a loan in higher interest. Apart from that, this type of emergency fund also helps you to avoid borrowing from others. If you want to plan for any unforeseen expense, it is essential to keep an emergency fund that can manage all of your unplanned expenses.
Hence, you need to keep some emergency funds in a savings account with higher interest and get quick access to meet your unplanned expenses. In this article, we have come up with some useful tips to save your hard-earned money to use it at the time of your necessity.
Tips to save money and build an emergency fund
The following are some ways to build an emergency fund:
The first thing that you need to do is to calculate the total amount which you need to save. For this, you need to figure out how much you need to add up your expenses for the next six months. Once you set the goal of saving an estimated amount regularly it will not be a daunting task. One good option to save regularly is to transfer funds automatically to your savings account every time you get the salary or are being paid.
Another great way to save money is to keep the changes in a jar whenever you have it. Once the jar is filled up with changes you can shift the changes into your savings account. Nowadays there are various options with the help of which you will be able to transfer funds automatically.
You can also save your tax refund amount. You file your tax once a year and you can expect a refund if more amount is deducted from your account than what you have to pay. When you will get the refunded amount you should not expense it rather you should deposit it directly to your savings account so that you can use the refunded amount at the time of necessity.
After saving an estimated amount at the regular interval you should try to adjust and save a little more so that you can add more money into your savings bank account. If you lead an expensive lifestyle or go through some major life events such as marriage or if you move to a new town or city then you may get into an emergency for which you need to cash. During that time you can use the emergency fund and it can save you financially from borrowing during the emergency conditions. Hence it is very essential to save and create an emergency fund.