Beginner’s Guide to Starting an Emergency Fund

AdobeStock_259480361 (2)

Life can change fast and unexpectedly, and sometimes those changes can end up being costly.

That’s why it’s especially important to be prepared for any financial curveballs that may be tossed at you.

Building an emergency fund for unforeseen circumstances can save you a big headache down the road and give you some peace of mind.

If you have never tried saving a bit of money for an emergency fund before, you might be searching for some pointers on the best practices for establishing and maintaining one.

That’s exactly what we’re here for.

Beginning to develop an emergency fund doesn’t have to be a stressful experience. This guide can act as a helping hand when delving into saving for the unpredictable.

Determine How an Emergency Fund May Fit Into Your Budget 

Before you jump right into starting an emergency fund, it’s important that you figure out how it will actually function within your budget.

You need to break down your income versus your expenses, plus whatever you typically put into any other accounts that you may have.

While it’s important to have some liquid money available in case of emergency, it’s also important that creating that setting aside those funds shouldn’t create financial strain on you.

Just put aside what you can — every little bit can help.

If you need some help budgeting for an emergency fund, or just budgeting in general, our financial coaching guide has some handy tables and tips to help you start budgeting smart.

Figure Out the Kind Of Account You Want 

Money in an emergency fund should be easy to access, with little to no fees for an amount withdraw — the entire point is flexibility and accessibility.

Still, there are a few different types of accounts that can be useful for keeping money tucked away in a safe place while also accruing a healthy Annual Percentage Yield (APY).

At HRCCU, we have a few types of savings accounts that provide APY while also allowing accessibility in case you need to withdraw quickly.

Universal Savings Account

These savings accounts offer .10% APY on average balances between $500.00 and $4,999.00, and .15% APY on average balances of $5,000.00 or more.

Money Market Account

Money Market accounts offer .10% APY on average balances between $1,000.00 and $9,999.99, .15% APY on average balances between $10,000.00 and $24,999.99, and .20% APY on average balances $25,000 and up.

Premier Savings Account

Premier savings offers an APY of .30% on average balances of $25,000.00 or more.

Once you’ve figured out the type of account that best suits your needs and finances, open the account and get to saving.

Consider Setting Up Automatic Deposits

If you’ve gotten this far, and have carefully budgeted out what you can afford, it’s a good idea to consider automatic deposits. This will do 2 things:

  1. You won’t forget to deposit money into the emergency fund regularly
  2. You’ll have a fixed and consistent amount of money being regularly deposited, which will help grow the emergency fun and also could qualify you for larger APY rates as the funds accrue.

Now that you’ve got a head start on starting an emergency fund, it’s time to start saving.

If you don’t already have an account with HRCCU, we make credit union enrollment easy.

Plus, we’re always looking to provide more financial advice and resources for our members, so that they can make smart financial decisions — it’s good to know that someone’s got your back.

Looking for more pointers on savings? Read our blog, “How to Start Saving When You’ve Saved Nothing”.