Building an Emergency Fund

As much as we prepare for life’s events, the unexpected can happen. Your pet might need a costly treatment. Your car could break down and require expensive repairs. You could damage your smartphone and have to replace it. Any one of these unplanned expenses could impact your budget by hundreds or thousands of dollars. A recent study found that 63 percent of Americans lack the savings to pay for a $500 to $1,000 emergency. This means almost two-thirds of Americans would need to cut spending or incur debt to cover emergencies – decisions that could create even more financial stress. Would you have the money to cover these financial curveballs? That’s where an emergency fund comes in.

There’s no need to dwell on the what-ifs, but saving for them is important; if you don’t have an emergency fund, the consequences could be financially devastating.

What Is an Emergency Fund?
An emergency fund is money that you have saved to help you cover unexpected costs that come with everyday life. This could be a medical emergency or home repair. Many of these costs cannot be predicted, but nearly everyone will face these kinds of expenses throughout their lives. That’s why having an emergency fund is always worthwhile, because you won’t be caught off guard without the means to resolve the financial situation. Experts say it’s smart to build and maintain an emergency fund with three to six months’ worth of living expenses.

How Do You Start an Emergency Fund?
First, know where your money is going and what your monthly need is. A great tool for getting a handle on this information is the ONE VIP Prepaid Visa Debit Card. With this card, you can track your spend, balance and deposits easily and on your phone.

Once you know your monthly need, set a monthly savings goal and set up the funds for automatic transfer to a separate account. That way, you will be saving money without even thinking about it. You will want to take a close look at your finances to ensure that you are not saving so much money that you can’t pay for other everyday costs, or so little that your savings won’t cover a potential emergency.

How Much Should You Save?
The size of an emergency fund will probably change as your financial situation does, so it’s important to revisit your budget and make sure you’re covered. For some, this might mean a couple of large transfers into an account. For others, building an emergency fund could be a longer process and might require smaller deposits each month. The key to building an emergency fund is to set money aside every month, no matter how small the amount.

Bottom Line
An emergency fund is truly something we all need. Covering essential expenses, of course, comes first, but developing a habit for saving will always serve you well in the future. Financial tools, like the ONE VIP Card can help you get a handle on your current situation and be the stepping stone to a better financial landscape. To learn more about the ONE VIP Card, visit https://onevip.com/

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