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In my previous article on budgeting, I mentioned savings and emergency funds. This topic is important, so I would like to spend some time talking about it.
Increasing your savings requires a plan. It starts with your budget. There are many ways to save money, and it’s important to find which one is best for you. The easiest way is to set up automatic deposits from your paycheck. Most banks and credit unions allow you to automatically transfer funds to various accounts on a regular basis. Ideally, your emergency savings should be in an easily accessible account at a bank or credit union that doesn’t charge taxes, maintenance fees, or early withdrawal fees. Ideally, you would be able to earn interest on the money in your savings account.
If you don’t have any savings, a good plan is to start small. You’ll probably save 5-10% of your paycheck, or $10 a week. The goal is to reach $500 to $1,000 as quickly as possible. This amount usually covers repairs to things like appliances and cars. Another way to save money is to create a savings plan. Calculate how much money you need to save as a goal. Next, divide the amount you want to save by the number of weeks you need to save. That’s your weekly savings goal. You can increase your savings by cutting out cravings like eating out or canceling cable TV or subscriptions for a while.
If you’re getting a refund, tax season is a good time to save. Consider putting all or part of your refund toward savings. Your refund will be automatically deposited into your savings account, so you don’t have to think about it. So easy! Another one-time opportunity for him to save money could be to gift him money on his birthday or holiday.
Once you have an emergency fund, make sure you use it only for emergencies. An emergency fund is a cash reserve that is used only for unplanned expenses or financial emergencies. The Consumer Financial Protection Bureau defines an emergency fund as savings that can be used for large and small unplanned bills and payments that aren’t included in your daily expenses and expenses each month. Examples include car repairs, home repairs, medical bills, and loss of income. Vacation is not an emergency. There are no cute clothes or shoes on sale either.
Having an emergency fund allows you to be prepared when the time comes. This gives you the freedom to not have to use credit cards or loans, which can lead to debt that is difficult to repay. Having savings is especially helpful for people with irregular incomes.
Once you’ve built up a minimum emergency fund, you may want to consider building up a larger emergency fund for bigger emergencies, such as an unexpected job loss. Saving up a few months’ worth of expenses can provide a cushion in case something unexpected happens.
Learning how to save money is a lifelong skill. Just like creating a budget, it takes some practice, so don’t give up. We’re sure you’ll be happy with the results. Have fun saving money!
Monique Koerner is a family and community wellness agent for K-State Research and Extension in the Cottonwood area. Contact us at 785-628-9430 or moniquek@ksu.edu.
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