Your car needs a new transmission. You slipped on the ice and tore the ligaments in your knee. Your roof started to leak. You lost your job due to a pandemic-related closure. Unanticipated bills and life changes can wreak havoc on your finances and your stress levels. And if the past year has shown us anything, it’s that it pays to be prepared. Here, we offer some tips to help you save for unexpected expenses.
Take Small Steps toward Savings
In an ideal world, we’d all have enough money saved to cover three to six months of living expenses in case of emergency. The reality is that most Americans fall far short of this goal, with nearly 25 percent having no savings at all. Unfortunately, the COVID-19 pandemic has only made things worse.
If you don’t already have an emergency savings account, your first step is to set one up today. Then take these steps:
- Automate a weekly, bi-weekly or monthly deposit into your emergency savings account. Even if you can only contribute a small amount from each paycheck, every little bit helps. Make it easy by scheduling recurring online transfers using Freedom@Home online banking.
- Challenge yourself to find opportunities to cut back on non-essential expenses. Possibilities include switching to a less expensive cable TV plan, dropping a streaming service, cancelling a subscription or changing to a cheaper phone plan. Try to negotiate less expensive rates or shop around for better options. Put the money you save into your emergency savings.
- Deposit any extra funds right away. If you get a stimulus payment or tax refund that you don’t need to pay immediate expenses, add it to your emergency savings.
- Check your insurance coverage, including auto, homeowners, renters, health and disability coverage. The right insurance can protect you from devastating expenses when emergencies strike, but make sure you aren’t paying for coverage you don’t need. Re-evaluate your policies every year and ask your insurer if you qualify for any discounts you may not be aware of.
Choose a credit card that lets you earn cash back rewards, then put them into savings. Avoid charging anything you can’t afford to pay for in full when the bill is due to avoid interest charges.
We’re with You Step by Step
Saving money can seem like a momentous task, especially if you are just starting out. Remember, building your savings is a marathon, not a sprint—but every step brings you closer to your goal.