Blog Post

According to Bankrate’s Annual Emergency Savings Report, 59% of Americans are unsatisfied with their emergency funds. Many struggle to build one post-pandemic through high inflation and interest rates.

The situation looks even more concerning when broken down by generation:

• Gen Z (ages 18-27): 29%
• Millennials (ages 28-43): 34%
• Gen X (ages 44-59): 31%
• Baby Boomers (ages 60-78): 16%

These numbers show that building emergency savings is challenging across all age groups. However, building a solid emergency fund is still possible with the right strategies and tips.

Who Needs an Emergency Fund?

An emergency fund is savings reserved for unforeseen costs or urgent situations. It can come in handy in a pinch for anyone facing:

• Car repairs: If your car breaks down and needs costly repairs, your emergency fund can cover them.
• Medical bills: Whether insured or not, unexpected medical bills can set you back considerably without an emergency fund.
• Home repairs: If your roof leaks or your fridge breaks down, emergency savings can help cover the repair costs.
• Job loss: If you lose your job, an emergency fund can provide financial support while you search for a new one.
• Family emergencies: If you need to travel suddenly for a family emergency, your fund can cover travel costs.

Top Best Practices for Building an Emergency Relief Fund

It's not too late to get started, even if you are at zero at the moment. Take the first step to a comfortable future with these emergency fund tips:

Determine Expenditures

A target can help you determine how much you can save each month. This way, you can calculate how long it will take to reach your goal. Having a clear timeline makes the process less overwhelming and helps you stay on track.

For example, if you want $5,000 and you’re able to save $400 per month, it will take you about 12.5 months to reach that amount. On the other hand, if you only save $150 each month with a goal of $2,000, it will take you roughly 13 months to hit your target. For a smaller goal of $1,500, saving $200 a month would allow you to reach it in 7.5 months. These savings goals and timelines can make your emergency fund achievable.

Automate Savings

The easiest way to save is never to see the money in the first place. Most employers offer direct deposit, and some let you split your paycheck into multiple accounts.

Set up a separate account just for your emergency fund and have your contributions automatically deposited by your employer or bank. Choose a savings account or another one that's harder to access than a checking one. This way, you're less likely to spend the money.

Don’t obsess over the balance. Watching it too closely can make the growth feel slow. Just forget about it and let time do the work.

For example, if you set up automatic transfers of $200 a month into a savings account, you’ll be adding to your emergency fund without even noticing. It’s an easy way to save without thinking about it!

Cut Back on Unnecessary Spending

Once you've set a realistic savings plan based on your budget, you'll know where your money goes each month. Look at your expenses and see where you can cut back.

Here are some examples:

• Gas: Combine errands to save on fuel.
• Eating Out: Cook at home instead of ordering takeout.
• Subscriptions: Cancel unused subscriptions, like streaming services or gym memberships.
• Shopping: Impulse purchasing is a costly habit. Avoid impulse purchases and shop with a list.
• Coffee: Coffee prices are rising! Brew coffee at home instead of buying it daily.

Small changes can make a big difference over time!

Balance Debt and Savings

If you're dealing with debt, you aren’t alone. Savings might not be a priority, but you can still get started. Paying that down first makes sense if you have high-interest debt, like credit cards. But if your debt is manageable, consider tackling both goals—debt and savings—simultaneously.

For example, if you have $500 extra monthly, you could put $300 toward paying off debt and $200 into your emergency fund. That way, you progress on both fronts.

Adjust Your Due Dates

Contact your landlord, credit card companies, utility providers, and anyone else you pay regularly. Ask if they can adjust your payment due dates to better fit your schedule. This can simplify your budgeting and make it easier to save consistently.

Here are some great ways you can do this and get emergency funds:

• If your credit card bill is due before you get paid, ask to move the due date to later in the month.
• If your utility bills are due right after payday, request a shift to avoid a cash crunch.
• If your student loan payments fall during a challenging financial period, see if you can change the due date to give you more flexibility.

Adjusting these dates can help create a smoother financial flow, making emergency fund management easier.

Creating an emergency relief fund may seem challenging, but it’s not impossible. If you’re feeling overwhelmed, seeking help from a financial professional can guide you in the right direction.

Make the Most of Financial Windfalls

Whether big or small, any unexpected financial boost can be an opportunity to add to your emergency fund. This strategy works well for those with irregular incomes, but anyone can use it. Here are some great financial windfalls you can benefit from:

• Tax Returns - If you get a tax refund, even a small one, save a portion.
• Gifts - Money gifts, whether from birthdays or weddings, can also boost your savings. If you don't need the money immediately, put some of it into your emergency funds.

Turning windfalls into savings can help you build your emergency relief fund faster.

Join First Capital Federal Credit Union Today

At First Capital Federal Credit Union, we’ve been dedicated to serving our members for 70 years. As a not-for-profit, full-service financial institution, we put our members first by offering lower loan rates, higher dividends, and valuable educational tools. Our commitment goes beyond quality products—we focus on delivering a personalized and efficient experience every time you interact with us.

Ready to take the next step in your financial journey? Join First Capital today and enjoy the benefits of a credit union that supports your financial endeavors. Contact us or visit our website to learn more and become a member!