Finance

Building an Emergency Fund? Here’s What You Need to Know

Building an Emergency Fund

There’s a reason the phrase expect the unexpected is so commonly used, especially when it comes to personal finances. No matter how careful you are with your day-to-day spending, sometimes expenses make their way into our lives without warning.

This is where the importance of emergency savings comes in. Life is unpredictable, no matter how much you try to plan your life. It’s crucial to have dedicated capital set aside to deal with those big-ticket costs — whether it’s a medical emergency or an urgent home repair. Otherwise, if you find yourself without a safety net, you may need to look at your options for payday loans in Canada — to avoid falling into debt.

Before you start to worry about your financial situation, here’s some insight into building an emergency fund.

Switch Your Savings to Autopilot

You likely have enough to think about in your everyday life. Why not create peace of mind when it comes to your emergency finances? Rather than manually moving over money every month, you can set your checking account to transfer money into your savings account automatically. Everyone’s finances are different, so it’s up to you to decide how much you can comfortably set aside without impacting the rest of your expenses.

Turn Credit Cards into Cash-Back

It’s essential to be mindful of how often you’re using your credit cards — they can be a slippery slope to debt. However, that doesn’t mean you can’t use them to your benefit, at least when it comes to building your emergency savings. The idea of cash-back credit cards is becoming more popular in households across Canada.

If you’re opening up your first card, most companies offer a cash-back bonus, which you can use to jumpstart your savings. As you use the card throughout the year, you’ll be rewarded with money based on the card’s established rate. Rather than use the money on frivolous items, this could be a simple and effective way to pad your emergency account.

Look for Ways to Cut Costs

If you’re committed to preparing for those emergency expenses, you’ll want to consider cutting back on your current costs. This can mean different things to each household, depending on your current financial standing — but there are always easy ways to save money throughout the month.

Cutting back doesn’t mean you can’t have any fun. Every city has fun and free activities that anyone can take advantage of, no matter the time of year. If you’re into arts and culture, museums can be a great place to get your fix. If you love staying active, take your friends or family on a hike or organize activities at the local beach.

Inside the home, there are just as many ways to save money without sacrificing fun or quality time. Instead of spending money at a restaurant, have a weekly cooking challenge and choose a different cuisine every time. Avoid the exorbitant costs of movie theatre tickets and snacks — instead, buy a box of popcorn and bulk candy and enjoying a cozy movie night at home.

While you may not be able to predict which expenses will take the most significant toll on your finances, you can start to prepare yourself. Establishing an emergency fund is one of the essential tools you can commit to when it comes to your finances — but it doesn’t have to be a stressful, challenging undertaking. With a few simple steps and a determined mindset, you can avoid debt and despair down the line.

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