How The Government Shutdown Underscored The Need For Emergency Savings
Without getting into the politics that surround the recent stalemate in Washington, the government shutdown that left almost a million federal employees and contractors without their hard-earned paychecks gave a national spotlight to the need for emergency savings. At Call Federal, one of the core tenets of our Money & Beyond financial education program is to establish periodic savings, so that you’re prepared for emergencies while deliberately working towards your short- and long-term goals.
Saving is hard; it takes commitment and planning. But you’ll be glad you took the time and made the sacrifice should you ever encounter a disruption in your income, whether it’s a federal furlough, corporate layoffs, illness or worse.
5 Steps to Preparing for Emergencies through Periodic Savings
Like Nike says, just do it. And, then do it again. To reach your savings goals, it needs to become a habit.
Save What You Can
Pick an amount that you’re comfortable with right now, like $10 or $20 a paycheck. Once you get used to setting that amount aside, increase it a little bit. Collect loose change and save that. Start a side hustle. Set aside part or all of your tax return. If you can get to 10% of your take-home pay, you’re well on your way!
Automate to Dominate
You know what’s even easier than creating a habit? Not having to think about it! If you’re already direct depositing your paycheck, either your employer or your financial institution may be able to automatically divert a set amount into your savings. Alternatively, most online banking applications have setting that allow for automation.
Once you’ve got the hang of this savings thing and are well on your way to achieving your emergency fund goal, it make sense to designate other things worth saving for, like vacations, holiday shopping, or adding to your retirement. By earmarking funds for specific purposes in separate accounts, you’re less likely to spend the money on other things.
Establishing your periodic savings is a vital step towards a financially healthy future, but there’s always more to learn. Keep an eye out for our Money & Beyond webinars on a variety of banking topics, as well as our Financial Insights blog for more opportunities to increase your financial knowledge.
A Final Word on Emergency Funds – How Much Do I Need?
While only you can decide the right number for you and your loved ones, it seems most financial advisers suggest three to six months of your monthly expenses. To find that number, we find online calculators like the one linked below to be very helpful. But, remember, if you’re starting from zero, this is likely to seem like a large number. Just get started. Then, stick with it. You can do it!
If you’d like a helping hand in putting together your savings plan, our team of Certified Credit Union Financial Counselors are at your service. Just email [email protected] and let them know you’d like to set up an appointment to talk about emergency savings. They’ll be more than happy to get you going and give you all the support you need.