You’ve been meaning to save for that Emergency fund but you never seem to get spare money to actually put into the fund. Sound familiar? Well, this little saving hack will change all that. It’s called the 365 challenge. And it works. The simple system relies on the principle that small dollars add up. And we are going to use it with one goal in mind – To Build our Emergency Fund this year.
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What is an Emergency Fund?
An Emergency Fund is simply a set amount of money set aside for Emergency Financial situations or unexpected bills like health bills or urgent home or vehicle maintenance. This amount can vary from household to household but it’s intention is to make you feel a little more secure knowing you have a cash safety net in the event of a financial hiccough.
If you haven’t got an allocated Emergency Fund, you’re not alone: 69 percent of Americans have less than $1,000 in savings, according to a 2016 GOBankingRates survey. And 34 percent have nothing in the bank at all.
This year we are going to change that. And it starts with the 365 Challenge.
How Does the 365 Challenge Work?
- Every Sunday you put aside $1, followed by $2 on Monday, $3 on Wednesday and so on. On Saturday you’ll put $7.
- Then start again with $1 on Sunday.
- After 365 days you will saved a total of $1456. OK, so it’s not quite $1,500, but I am sure you can figure out a way to top it up.
Don’t trust yourself to actually do this?
Then make it automatic.
Open a no fee savings account and automate the savings by setting up a transfer from your bank account. Check with your bank, but most banks allow unlimited transactions between your own accounts without penalty. Maybe you feel silly transferring one or two dollars? Don’t!
You are doing what it takes to build your Emergency Fund this year.
Why do you need an Emergency Fund?
Life doesn’t always go to plan. If you are living paycheck to paycheck or on a single income, then chances are you have very little or nothing at all in savings. Hoping that nothing will happen to tip you over into a financial down spiral is not a secure way to live. I know because for years I lived like this.
Your Emergency Fund is like a safety net. In the event that something unexpected happens, it is there to stop you crashing to the ground.
How Much Should you keep in your Emergency Fund?
Financial experts say between 2 – 6 months should do it. But honestly, any fund is better than no fund. Aim to complete this challenge over the course of the next 365 days.
What if you need to draw money out of the fund for Emergencies.
Don’t Panic! This is what you were saving it for. Aren’t you glad you had it available? The first time you use the money your Emergency fund is a little of a bitter sweet experience. You work so hard to save the cash, only to draw it all in one go over a medical bill, burts water main or new car tires. It can be disheartening, but it is also a reminder about how good it is to have an Emergency Fund to fall back on.
What to Do if you Spend all your Emergency Fund Money?
You start again with renewed energy. Building your Emergency Fund is a Household priority that provides you with security and peace of mind. To get your emergency fund started, consider reworking your budget and trying to find areas where you can cut spending and allocate it towards savings. Focus on building a savings stash that will make you feel secure.