Even if you’re living paycheque to paycheque, putting aside even a little bit of money can eventually grow into a fund you may need one day (like if you lose your job or if the furnace needs to be replaced).
Life has a funny way of sneaking up on you with unexpected emergencies — emergencies that can cost a lot of money (an accident that rings up medical bills, a roof that starts leaking, a car that breaks down, you name it). And when you’re already stressed out by this unexpected issue, it can be a huge relief to know you have the money put aside so that you don’t have to use your credit card and rack up debt at a high interest rate (which will weigh on your shoulders for months or years to come).
But how can you save money when you’re only just getting by as it is? Make a budget, and figure out how much you can easily put aside from each paycheque that won’t affect your budget. Even if it’s as little as $20, all you have to do is get started. Eventually that $20 every second week will add up. Here are some more tips on putting aside money for an emergency fund.
Put aside three months’ worth of living expenses
Ideally you should have three to six months’ worth of living expenses set aside. This will give you enough time to pull yourself together and figure out various factors should an emergency occur, whether that means finding a new job or selling your home, for example.
Make the savings happen automatically
Set up automatic withdrawals from your bank account on the day your paycheque is deposited into your account. This way you probably won’t even notice the difference from before you set up the automatic withdrawals. After a few months, if you feel your budget can manage it, increase the amount being withdrawn slightly to accelerate your savings if you have in fact not noticed a difference in your funds since starting your emergency fund.
Don’t touch the savings account (unless you have an emergency)
Your emergency fund should be in a savings account that earns interest (rather than sitting in a chequing account that earns no interest). Keep the money in this account so that it’s not readily accessible and you won’t be tempted to dip into it should you be out shopping and come across a great sale. In fact, if the account is linked to a particular debit card, don’t carry that debit card around with you.