You should have an emergency fund in a high-yield savings account. In an ideal world, this fund would contain enough money to cover three to six months of living expenses. For many people, this can seem like a fantasy, though. In fact, Pew Research found almost 60% of Americans admit they are unprepared for a financial emergency.
The sad reality is, you’re really financially vulnerable if you don’t have some money saved — especially given that about six in 10 households told Pew that they’d experienced a financial shock recently. You could end up in credit card debt, or worse, if you find yourself experiencing a problem such as an illness, job loss, or large unexpected repair expense.
If you don’t want a surprise expense or drop in income to turn into a major crisis, consider trying out one of these three ways to save up an emergency fund as quickly as possible.
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1. Save your windfalls
When you are trying to save money for emergencies, pocketing any “extra” cash that comes your way can help you get your rainy-day fund up to the level where it needs to be. These windfalls can come from lots of different sources.
For example, the average tax refund was $2,903 in 2023 as of the week ending March 24, 2023. If you get a similar-sized refund and put it directly into a savings account earmarked for emergencies, you’ll be well on your way to being able to cover three to six months of expenses if something goes wrong.
If you get a bonus at work, holiday money, or even save $20 on a product you always buy because you use a coupon, the money from those windfalls should go immediately into your special emergency savings fund if your goal is to bulk up this account ASAP.
Don’t wait to move the money over when you end up with extra, as you might find yourself spending it on something else. The minute the windfall is deposited in your bank account, you should transfer it to emergency savings ASAP.
2. Consider a side hustle
Bringing in extra income is a great way to get more money into your emergency fund quickly. In fact, you could commit to working an extra job for a limited time until you’ve managed to grow your emergency fund to the desired amount.
The average side hustle brings in around $483 per month from workers. If you can consistently make that much (or more) each month, you’ll have your emergency fund in no time.
In fact, with average personal monthly expenses in the U.S. coming in at $3,405, you’d need about a $10,215 emergency fund if you spend what most people do. With your side hustle, you could save up that much in around a year and a half — or less if you’re saving your windfalls and bringing in extra income with your side hustle.
3. Make some huge (temporary) spending cuts
Finally, you can go through your budget and slash everything non-essential, focusing all of your efforts specifically in saving for emergencies. This isn’t usually a good idea over the long term since it’s hard to stick to a bare-bones budget, but can be worth doing when you need to grow your emergency savings ASAP.
The Bureau of Labor Statistics reports that the mean consumer unit spends $3,639 each year on food away from home, while also spending another $583 on alcoholic beverages. If you gave up dining out and drinking out temporarily, you could save about $4,222 that you could divert to emergency savings.
You could also make other cuts to spending by:
- Switching to a cheaper store for groceries, such as buying some items at Dollar Tree or Costco instead of the grocery store.
- Taking advantage of free entertainment. Check out Facebook marketplace to learn about free events in your area and attend them rather than paying to go to the movies or a bar.
- Tracking spending for 30 or more days to see where you’re overdoing it and making modifications to that spending category.
If you combined the money you save from spending costs with extra income from your side hustle and windfalls like your tax refund, you’d have no trouble getting your emergency fund filled up in no time.
While working more and giving things up may not sound like fun, you’ll be glad that you made the sacrifices when an inevitable emergency comes along.
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