Throughout the coronavirus outbreak, now more than ever, people are beginning to realise just how important having an emergency fund truly is. They're instrumental as they can keep you from racking up unnecessary credit card debt or taking out loans you really can't afford when something urgent comes up. A good rule of thumb is to have enough savings to pay necessary expenses for three to six months (but the more the better). If you do have a cash cushion built up and have been able to rely on it during this crisis, great! But if you don’t, not to worry. In this post, we’ll explain how you can still save during the pandemic and slowly but surely start to build that emergency fund for the long-term.
Set a goal
To start building your emergency fund, the first thing you should do is set a target of how much it is you’d like to save. If you’re just starting, your goals can be low, to begin with. This will help keep you motivated each time you reach a milestone. Then you can gradually increase your objective as you start to reach your smaller goals or as your financial situation improves. With Monese, you can quickly give your savings pot a goal to help with this. Easily keep track of how much more you need to reach your target right in your app.
Start with something
People often worry they don’t have enough income to start saving, let alone building any kind of a cash cushion. But the crucial thing is to start with something, even if it’s a small amount at first. Slowly you’ll start seeing that piggy bank grow, and it’ll be so satisfying! If you get a higher-paying job or a promotion later on, you can then adjust the percentage you save to help build your emergency fund even quicker.
Even if you’re someone who isn't used to saving, you may not realise it, but you’ve probably been forced to save now anyway due to Covid-19. Just think about all the things that are closed during the lockdown, that you’re no longer spending money on: gym, cinemas, weekends away, restaurants, happy-hour drinks, commuting, etc. This is money you can easily set aside for your emergency fund now.
Review your budget and spending
On a related note, the outbreak has forced many households to reorganise their budgets and monthly spending. This is the perfect opportunity to cut down by reviewing the services you might still be paying and even overpaying for during the Covid-19 outbreak. Figure out where you can afford to cut back and then put this extra money towards your reserve instead.
Save your tax refund!
Saving your tax rebate is an excellent trick for starting your rainy-day fund since it’s an extra income you don’t usually account for. While many people are quick to spend their tax refund on a vacation or blow it on shopping, you can save it instead and start your cash cushion with that. Plus, it shouldn’t be too hard this year either given that none of us are travelling or going anywhere anytime soon, so you’re even less likely to spend it! Keep in mind, though, that if you’re expecting your rebate around this time, it may be delayed this year due to coronavirus — but rest assured it’s coming!
Make use of Monese pots
You need a safe place to store your money and keep it separate from your everyday personal funds and spending. That’s why we created our pots, which make it easy to save. Create a pot and name it your “cash cushion”, “emergency fund”, “rainy day” — whatever you wish! Then, you can easily round up your transactions, sending the spare change to your reserve fund. You can even choose to multiply this spare change by up to 10 to help you build your emergency fund even faster.
To make saving less daunting, it’s essential to get into a saving routine. Whether you choose to save once per week or once per month, the crucial thing is to pick a time and stick to it as best as possible. For example, a good idea is to save each time you get paid. This will get you into the habit of saving and not give you the chance to blow your pay cheque before putting towards your savings. With Monese pots, you can quickly set up recurring payments to your pot to automate your savings as well.
Don’t touch your reserve
A way to keep your emergency fund intact after months of putting money towards it is not to spend it unless it’s truly an emergency. An emergency fund should be different from saving for an annual vacation, home renovation, paying off a mortgage or other debt. With Monese, you can create up to 10 different pots per currency account to help you save for more than one thing at a time.
Do you have any other ideas to help get a cash cushion started? We’d love to hear your suggestions! Get in touch on Facebook, Twitter, Instagram or email us at email@example.com to share your tips.