Money Saving Hacks/Tips

#27: How to Build a $15,000 Emergency Savings Fund in 9 Months – Tips From Steven Goodwin

Today’s money hack is about quickly saving up money for an emergency fund.

From time to time we like to check in with our followers on social media and see how they manage their financial lives. Today we happened to meet Steve Goodwin via Twitter. He runs a website titled, My Family Budget, and was kind enough to share his top 3 tips for saving money in an emergency fund.

how to build emergency fund, tips to create emergency fund quickly

The conversation started when Steve mentioned over Twitter that his family recently achieved the financial milestone of setting up a 6-month emergency fund for the second time. His comment was a response to an article I recently published about the importance of creating an emergency fund to stay debt free when unforeseen expenses meet you in life.

The idea of setting up a second emergency fund intrigued me and upon inquiry, I was told that the first one had been used up to replace a worn down vehicle using cash instead of credit. Kudos to them!

The target for both the first and second emergency funds was $15,000 for a period of 6 months, which implies that this sum of money would have been able to cover their expenses for half a year if the bread winner were to lose his/her job. Some people like to keep an emergency fund worth one year’s expenses, while others prefer to start with a much smaller target of a month or two.

Steve revealed that the first emergency fund took over a year to save for but the second time over the duration was significantly reduced to 9 months with a bit of aggressive saving, budgeting and investing to support their saving efforts. Here are his top 3 money hacks for building an emergency fund:

  1. Budget every month and cut as many extra expenses as possible,
  2. Invest money to support savings,
  3. Put the money in a bank account that is not easy to access, i.e. there should be no checkbook or ATM card associated with that account.

These personal finance tips are pretty intuitive and in my opinion, the third one is extra helpful because it ensures your savings remain safe from impulsive spending decisions. Some people may prefer to invest their emergency fund savings into an asset that is less liquid than cash, such as a gold coin or even some real estate, while others prefer to keep them in a savings account at the bank. Of course, each type of asset has its pros and cons and every individual must determine which option is best for him or her.

Further reading: Savings fitness:  A guide to your money and your financial future by US Department of Labor.

Advertisements

3 thoughts on “#27: How to Build a $15,000 Emergency Savings Fund in 9 Months – Tips From Steven Goodwin

  1. Great post! I’m honored that you would feature me in your article! Building an emergency fund has been one of the best decisions that we’ve made behind starting to tithe regularly and paying off our debt (other than our house so far). Paying cash for our cars has helped us build wealth quicker by keeping our monthly cash flow much higher!

  2. Pingback: October 2016 - $95,926.67 - Net Worth Update (-$2,633.43)

Share your thoughts!

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s