How to Build a Starter Emergency Fund – First Hustle Then Brunch™ (2024)

FAQs

Is a $1000 emergency fund enough? ›

If you have any debt other than a mortgage, then you just need a $1,000 emergency fund—aka a starter emergency fund. We call this Baby Step 1. It's the first piece of your money journey, so don't skip over it. That starter emergency fund sets you up to begin paying off your debt—that's Baby Step 2.

1. Set several smaller savings goals, rather than one large one. Set yourself up for success from the start. Rather than shooting for three months' worth of expenses right away, shoot for one month.

Key takeaways. Start by saving $1,000, then aim to save 3 to 6 months' worth of essential expenses by funding your emergency savings, as you would for a bill. Try to save in an account that pays some interest but preserves liquidity.

Create a Budget: Analyse your income and expenses to identify areas where you can cut back and allocate more towards your emergency fund. Automate Savings: Set up an automatic transfer to your emergency fund each time you receive your paycheck. This ensures consistent contributions.

The 50-30-20 rule recommends putting 50% of your money toward needs, 30% toward wants, and 20% toward savings.

How Much You Should Have in Your Emergency Savings. Here's a Dave Ramsey principle we agree with: If you make less than $20,000 per year, aim to have at least $500 in emergency savings. If you make more than $20,000, then aim for at least $1,000.

How much should you have in your emergency fund? The golden rule is to squirrel away at least three to six months of your basic living expenses for an emergency. That way, should a major life-shifting event set you back financially, such as a job loss, you'll have enough to cover your bills.

Bank or credit union account — If you have an account with a bank or credit union—generally considered one of the safest places to put your money—it might make sense to have a dedicated account where you can keep and maintain these funds.

How much cash should I keep at home in case of an emergency? ›

It's a good idea to keep enough cash at home to cover two months' worth of basic necessities, some experts recommend. A locked, waterproof and fireproof safe can help protect your cash and other valuables from fire, flood or theft.

Over time, the compounding effect becomes increasingly powerful, leading to significant wealth accumulation. To fully harness the power of compounding, it is crucial to consider two essential factors: time and rate of return.

CDs, high-yield savings accounts, and money market funds are the best places to keep your cash when it comes to interest rates. Treasury bills currently offer attractive yields at the lowest risk. Learn how they compare in terms of yield, liquidity, and guarantees.

A personal loan can be a helpful option to secure emergency funds quickly. Here are several ways in which a personal loan can assist you in times of financial emergency: Quick Access to Funds: Personal loans often have a faster approval process compared to other types of loans.

To prepare for income shocks, many experts suggest keeping enough money in your emergency fund to cover 3 to 6 months' worth of living expenses. So if you spend $5,000 per month, your first emergency fund savings milestone should be $2,500 to cover spending shocks.

Only 44% of U.S. adults would pay an emergency expense of $1,000 or more from their savings, as of December 2023 polling. Inflation is a common culprit that's affecting savings.

Key Takeaways. More than one in four Americans (28%) have savings below $1,000. This is the case for 32% of Gen Zers, followed by Millennials at 31%, Gen X at 27% and Baby Boomers at 20%.

If six months' worth of expenses seems like way too much to save in a short time period, start smaller. Make a goal of $1,000 or $2,000. Once you reach that, up the ante. You'll feel good about reaching a goal and watching your emergency fund continue to grow.

People in stable jobs are recommended to put away 3-6 months' salary into their emergency fund, whereas people with lower job security are recommended to save 6-12 months' salary. A stable income ensures a consistent and bigger emergency fund. The number of earning members in the family also matters.