Let's admit that most of us don't have an emergency fund to rely (unless you call your emergency fund: mommy, daddy, and friends)?
The original rules for emergency fund is to have six months covered for mandatory expenses. These expenses include: rent/mortgage, car payment, insurance (auto/home), electricity (if paid separate from rent), one phone (though the phone companies offer lifeline [POTS] service which gives you local service for the low income), $5 per day per person for food and $20 per week for gas (if you are a rideshare driver, your gas expense is covered), have one credit card without an annual fee and no balance for car maintenance (Firestone credit is a good option). During a down time, you want to limit your driving and trips. Be creative in your home meal preparation by shopping at dollar stores for groceries and dollar store shopping at your main supermarket.
Your emergency fund should cover 12 months of necessary expenses mentioned above, ideally target for 24 months.
As you build your emergency fund, you would want to keep your monies in an interest bearing savings account, accessible in 24 hours but not easily accessible that raises the temptation to raid the bank unnecessarily?
Two good options for savings account is the American Express personal savings and at the time of this writing is earning 0.5% APR, and a Netspend savings account which earns 5% on the first $2000 then 0.1% the remaining balance. If you live in the state of New York or Texas, you can obtain a free American Express Serve prepaid debit card without any fees. In other states, you can request a free American Express Bluebird prepaid directly from American Express. You can buy the Serve and Bluebird card at your local retailer but there are fees, or request directly from American Express. You will then link your Amex Serve or Bluebird to your American Express personal savings account, as well as cross link your Netspend card with your American Express personal savings account. American Express personal savings account also offers remote deposit of checks. Netspend also offer remote check deposit but is subject to approval? You may also mail a check deposit to your American Express Personal Savings account, just ensure your check is endorsed properly.
An added benefit with Netspend is if you have direct deposit whether from payroll or a benefit, you can receive your monies early, subject to their terms? Netspend also offers printed checks as well as you can pay bills via ACH debit. Other banking options for building your emergency funds is through neobanks?
Building your emergency fund should be accomplished while you have steady income. If you have no money left over from your paycheck, you must reevaluate your priorities and reduce your expenses. This is the time to reduce expense not while in crisis-mode?
By opening the savings accounts with the free prepaid debit cards, you have the infrastructure setup for your emergency fund. Now you need to begin contributing to your fund with a target of 6 months, 12 months and 24 months of expenses covered. After you have reached 24 months, don't stop. Keep contributing as the excess you make the crisis time less painful as well as can be used for a down payment if you are currently renting?
To make savings less painful in the beginning, start by targeting 1 month of expenses in your reserves. When you have one month of expenses in savings, increase to two months (second month will be easier because you have established savings momentum), then target three months. Once you have three months of expenses in your emergency fund, you are in full savings momentum and can reach six, twelve and twenty four months of emergency savings.
If you are also paying down credit cards, you should also put something towards your emergency fund. Knowing that you have a small savings is going to give a better feeling than just living paycheck to paycheck.
Survival Revealed originally created as a pamplet in 1989 to help a person get back on their feet. Survival Revealed offers real life tips to survive life shortcomings and excel.