5 Smart Ways to Grow Your Emergency Fund in December 2022

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Once you’ve established your foundation, successfully building your emergency fund depends on habitual contributions. 

Regular contributions will add up faster than you think and put you in a more secure position when you need it. When you have the security of a stable income, automation and regular increases make it easy to save without really thinking about it, but saving any amount can be much more difficult when you’re already facing financial hardship.  

No matter where you stand financially today, here are a few strategies you can use to escalate your savings, both short-term and over time. Use these to personalize your approach as you develop a plan that works for you.

Automate Transfers

Out of sight, out of mind isn’t just a tired maxim; it’s also a foolproof saving strategy.

Streamline your savings by establishing a direct line from your checking account to your savings regularly. If the cash isn’t there in the first place, you won’t have time to miss it before it’s safely tucked away in your emergency fund. 

“If you are working and earning an income, the best way to save is setting up a direct deposit from your paycheck into your savings account or having an automatic transfer from your checking account into your savings account every payday,” says Greg McBride, CFA, chief financial analyst at Bankrate.com.

Be careful, though, especially if your income fluctuates, to ensure you don’t overdraft your account or leave yourself without cash on hand to pay regular monthly expenses.

Check for Extra Money at the End of Each Month

Especially if your income is unstable or fluctuates, a more sustainable approach may be to establish a system where you evaluate your checking account after expenses are paid, then move any extra money to your emergency fund every month or two. 

“Determine a certain amount in your mind,” says Liz Plot, CFP, associate financial planner at Ballast Point Financial Planning in Columbia, Maryland. “If your checking account gets above $1,000 and you’re done paying bills for the month, then just sweep that money, whatever it is, over to the savings account.” 

Fine-Tune Your Budget

Take stock of your monthly spending to find places you may be able to cut back to boost your savings.

“Chances are if you’re looking at how you spend your money, there’s some money that you can scrounge up and find,” says Jill Schlesinger, CFP, host of the “Jill On Money” podcast.

For instance, maybe you’re willing to cut back to one takeout meal per week or limit impulsive online shopping orders. Look for recurring subscriptions charged to your credit cards each month; you may increase your savings contributions by canceling the streaming service you forgot you even signed up for or suspending the gym membership you haven’t used in months.

Don’t be afraid to consider more consequential expenses, too. 

Housing makes up the largest monthly expense for many people. If you’re willing to compromise on space or location the next time your lease is up for renewal to save a few hundred dollars each month on rent, that can make a huge difference in your budget and what you’re able to save.

Take the time to determine how much money you have going in to and out of your accounts each month. When your cash flow better serves your needs, you’ll reach your financial goals more easily.

Use Your Tax Refund or Stimulus

Building an emergency savings while facing an emergency is no easy feat, especially if you’re suffering from a loss of income. As the current pandemic continues to leave many Americans out of work, it’s more important than ever to find solutions where you can.

As you receive cash windfalls — whether your tax refund, a stimulus check, or even a bonus — direct as much of it as you can toward savings. Even if you’re left with a small sum after paying necessary expenses, setting that amount aside into your dedicated savings account can help ensure it’s reserved for emergencies and still there when you need it.

And when your income is more stable, continue the habit. Anytime you receive a windfall, whether it’s a bonus, settlement, or inheritance, reserve a portion of it for your savings account.

Look Into Assistance Programs

In response to the current crisis, many creditors, lenders, and even landlords have issued customer assistance or forbearance programs for those affected. Deferring payments on your student loans or credit cards without incurring interest for a few months can be a great help in building a sustainable cushion to help you get back on your feet over time. 

“If you have a type of bill due that you might have flexibility on, contact them instead of trying to use your savings, because a lot of mortgagers, landlords, even private loan companies and banks, are making accommodations,” Plot says.

Today’s situation is unique, and you may find lenders more willing to work with you than you’d expect.

“During the time between when the payment is due, and you’re collecting unemployment, and you have a little bit of extra cash flow, don’t spend the money [you’ve already saved],” Schlesinger says. “Keep building those emergency savings as much as you can,” 

Just make sure you fully understand the terms of any program you enroll in, so you don’t end up with more debt in the long run.

Pro Tip

Automation, budgeting, and monitoring your accounts regularly can all be great ways to boost your savings. 

In Summary

Like any new habit, if you can make your savings strategy as easy as possible, it’ll be much easier to integrate into your everyday life.

In the short-term, take advantage of assistance programs to help you meet payment minimums while freeing up some extra cash, but be mindful to prioritize building your savings once you’re back on your feet. Automatic transfers and fine-tuned budgets can be great ways to boost your savings, so you don’t get blindsided when an emergency hits.

Continue to the next portion of this guide to learn more about when you should actually use the cash in your emergency fund and how to prioritize savings versus debt payoff and investing for retirement.

Continue Emergency Fund Series