When an Emergency Zaps Your Savings

Things happen and when they do, an emergency savings can be a lifesaver.  But, when you’ve worked hard to build an emergency fund and draining it can be a real downer. You could even lose your savings momentum. Don’t despair, you can get it back.

First Step: Set a Realistic Emergency Savings Goal

Experts are advise that everyone have 6-12 months in emergency savings. That’s a daunting amount of cash, but, let’s look at
practical means for reaching it.

Step 2: Start Saving

It’s most important to remember these three points:

1. A small amount of savings is better than none.

You probably didn’t build your emergency fund overnight. Establishing a disciplined savings strategy is most important. Make temporary cut backs to luxuries like cable TV and dining out. Use any “extra” money like tax refunds or cash gifts to boost your savings.

2. You can’t miss what you don’t see.

Whenever possible make savings automatic. For example, allocate a portion of your paycheck by using direct deposit. Direct deposit can be split between accounts any way you like.  Establish automatic monthly or bi-monthly transfers from your checking or savings account
to your emergency fund.

3. Savings should be safe and accessible.

Your emergency savings fund should be separate from your regular savings and easy to access when you need it.  Additionally, look for accounts that earn higher interest than a regular savings account. It’s important that the account be federally insured and not rely on risk-based investments.

The Build a Dream Savings Club at Coors® Credit Union is a good account to start your emergency fund.  Savings rates on this account are significantly higher than traditional savings. You can start this account with a small minimum deposit of just $25 and make unlimited deposits until the account reaches $3,000. You must keep your money in this account for one year, but this helps you build savings. If you should run into a need to tap this emergency account, you’ll encounter early withdraw penalties, but that’s not earth  shattering.

Once your account reaches the maximum of $3,000 you could then move your money into a money market account. Money markets are great because you retain access to your money, can continue deposits and earn a higher rate than traditional savings.

The biggest obstacle to rebuilding your emergency fund is convincing yourself that it is possible. However, if you used your emergency fund in the past you know how important having a little rainy day cash can be.

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