Consider doing some extra work to help build up your savings account. “Delivery and rideshare apps make it easy. Picking up a side hustle is another way to earn money you can sock away. Many digital banks don’t charge them and it’s worth asking your bank what their policy is,” says Hamilton. Consider overdraft fees: the average household pays $250 per year in overdraft fees. “There are many hidden fees and costs that you might not be accounting for, and they hit hard when money is tight. You can even sell gift cards that you aren’t using for a portion of their face value,” says Rebell.Ĭutting out extra fees can also save you money that can be repositioned into an emergency savings account. You can usually sell them easily and add the cash to your savings.
“You probably have older versions of electronics that still have value. Something else you can do to make some extra cash is to consider a spring cleaning of your unwanted belongings. Anastasio says a great practice is to have your employer or payroll department send a percentage of your paycheck directly to a separate savings account. “The less you have to proactively do, the more likely you are to succeed,” says Rebell. To help you save more so you can reach this essential savings threshold, utilizing automation services can be beneficial. “Six months is more appropriate for homeowners, single-income households and anyone who has others relying on them for financial support,” says Anastasio. Of course, more than six months allows for more flexibility, but it’s not necessarily essential and it’s considered out of reach for many Americans.Īnastasio says if you’re a renter, three months of savings is acceptable, especially if you have highly marketable skills or if you’re in a dual-income household with no kids. That’s a reason you should not just put all your money into savings - you want your money to work for you. “If the money is just sitting in a savings account and not being invested, given the rate of inflation compared to what you receive in interest earnings from that savings account, it is losing value,” says Rebell. How much you should have saved up depends on what makes you feel comfortable, so if nine months feels right, then that would be your benchmark. An emergency fund is meant to cover emergencies only, and everyone needs one,” says Hamilton. “Maybe your refrigerator breaks and must be replaced, or your car breaks down and it isn’t covered by insurance or you or your child become sick and need expensive medical care. That said, even if you don’t lose your job, emergencies and semi-emergencies happen.
“If you found out tomorrow your employer went bankrupt and could not give you another paycheck, what expenses would you still need to pay? Gym payment, subscriptions, cable and any luxuries or non-essential expenses you could cut if needed should not be included in your calculations,” says Lauren Anastasio, director of financial advice at personal finance app Stash. You do probably need internet service because without it, you likely can’t work or be in touch with your employer or potential employers,” says Rebell.Īnother way to think about what you need to have your emergency fund for is to think about what bills you would still have to pay if you lost your job.
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“You may think for example that you need cable TV but you don’t. So how do you figure out what your essential expenses are? Rebell says you should think about anything else that you absolutely need, like food, insurance or childcare. And Bobbi Rebell, author of Launching Financial Grownups and personal finance expert at Tally, an automated debt management app, notes that: “You always want to have enough cash, or access to liquid assets that can cover your basic expenses that are non-negotiable, such as rent or mortgage payments,” says Bobbi Rebell, author of Launching Financial Grownups and personal finance expert at Tally. Your emergency fund would pay for food, housing, healthcare and gas,” says Brian Hamilton, founder of ONE, an online-only financial institution. “Emergency savings are not for discretionary expenses but for essential needs that must be paid for in the event you lose your job or ability to work.