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The Basics of How to Start an Emergency Fund

We're thrilled to present this smart LearnVest story here on Savvy!

Rainy days are inevitable. Lately, they seem to stretch into rainy weeks and months. To guard against these unexpected tough times — emergencies — an easily accessible stash of cash is a must!

Build It Up

Experts recommend that you have at the minimum 6-9 months of your living expenses in a savings account for potential rough times.

If you don’t currently have enough to cover your living expenses for eight months, start by trimming the fat. Do it by calculating your budget.

After you’ve separated the need-to-haves from the nice-to-haves, set aside an amount every month from the nice-to-have pile to go into your emergency fund. Even $10 makes a difference!

Automate Yourself

Once you’ve figured out your amount to set aside, take temptation out of the process. Go online and set up automatic transfers to deposit your chosen amount directly from your checking account to your emergency savings every month. Alternatively, get your employer to divert some money from your direct deposit paycheck straight into your emergency fund.

Read on for more about emergency funds.

Get A Good (Financial) Parking Spot

Stash this money where it can earn good interest. We recommend putting it in a high-yield savings account. Your emergency fund will help grow itself.

Here are some we like, from brands that fit LearnVest’s most trusted criteria in the area of savings accounts:

ING Direct

The grandfather of online high-yield savings is currently offering a competitive 0.9% APY with no minimum balance and no fees. This one makes it super easy to automatically transfer money in from your normal checking account.

Ally Bank

No minimum balance and no monthly fees are two perks, plus an impressive APY of 0.85%. Six free transactions are allowed per statement cycle.

American Express Bank

Who knew the credit card company offered savings accounts? With no minimum deposit and no fees, right now you can score a 1% APY here.

HSBC

With a mere $1, you can open a savings account that offers 0.8% APY. There no monthly fees or minimums, and you’re under no obligation to open up a checking account to go with your savings (unless you want to). You can connect this savings account to as many checking accounts as you want, no matter what bank they’re at.

One last thing: A last-minute weekend trip to Florida this winter does not count as an emergency.

Image Source: Thinkstock
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