How to create an emergency fund: Prepare for the unexpected
In an ideal world, we could all predict the future and we would not need an emergency fund. Unfortunately, this is not the case. However, there are ways to prepare for the unexpected (Do you remember our tips for dealing with unforeseen expenses?).
If you do not know what an emergency fund is, it is exactly what it sounds like: money that you have set aside as a forecast for future emergencies that may come across in your life.
Between paying bills, rent, purchase, car repairs, birthdays, weddings, vacations, and all other unforeseen expenses, I’m sure you find it hard to believe that you can set aside some of your salary for an emergency fund. But it can!
Do I need an emergency fund?
Everyone can benefit from having an emergency fund, you included. It never hurts to have something reserved, because the unforeseen happen to everyone, whoever you are. It is true, however, that there are people for whom it is even more important, such as those suffering from diabetes, asthma or food allergies. Between recipes, medicines or treatments, an emergency fund will involve less stress and worry in advance.
How much money do I have to have in an emergency fund?
It is difficult to determine exactly how much money you need in an emergency fund, but there is a consensus that six months of living expenses provide a good cushion. Yes, it sounds a lot, but the main thing is to start. Set a realistic goal on how much you can set aside and start as soon as possible.
Start with little
Saving money for six months of subsistence is a very ambitious goal for almost any of us, and when we notice that an object is not tangible, we are likely to lose heart and abandon it. That’s why you have to start with less. For example, if you manage to save € 100 per month, it means that you will save € 1,200 per year. Even only € 500 a year can make a difference.
Picking up momentum
If, for example, your goal was to save € 1,000 a year for your emergency fund, you will feel really satisfied not only for having achieved what you proposed but also for possible interests that money has generated. You will exude motivation from all pores, and motivation generates more motivation, so there is no better time to set another goal a step above you. For example, save € 50 or € 100 more per month than before.
If the lean times come and you have not been able to save
Although it is impossible to prevent unexpected emergencies, we believe that we can help you get easy loans that give you access to quick money in case of emergency. A relief, right?