It’s usually best to keep emergency savings in a bank or credit union savings account. These types of accounts offer easier access to your money than certificates of deposit, U.S. Savings Bonds, or mutual funds. Though these are useful tools for long-term saving, they are not ideal for an emergency fund that you may need access to more quickly.
But not too quickly. Keeping your money in a savings account makes it much less likely that you will use these savings to pay for everyday, non-emergency expenses. That’s why it is usually a mistake to keep your emergency fund in a checking account.
You may well need at least $100 to open the savings account and a $200 minimum balance to avoid monthly fees. In most areas, however, there are several financial institutions with lower minimums. Also, banks and credit unions may waive the minimums if you have other accounts at that institution or if you agree to regular, automatic transfers from checking to saving. Your local America Saves campaign can help you find a participating financial institution that offers low- or no-minimum balance savings accounts.
The Best Way to Save for Emergencies
The easiest and most effective way to save is automatically. This is how millions of Americans save at their bank or credit union. Your bank or credit union can help you set up automatic savings by transferring a fixed amount from your checking account to a savings account. Learn more about saving automatically.
- Save for Emergencies
- Why you should start saving for emergencies
- How to Find Money to Save for Emergencies
Saving for emergencies is, and should be, a top priority for every American. Maintaining an emergency savings account may be the most important difference between those who manage to stay afloat and those who sink in debt. That’s because keeping $500 to $1,000 of savings for emergencies can allow you to easily meet unexpected financial challenges such as:
- repairing the brakes on your car;
- buying your child a new pair of needed shoes;
- replacing a broken window in your house;
- paying for a visit to the doctor when your child has the flu;
- covering the dental expense of filling a painful cavity;
- paying for a parking ticket; or
- flying to visit a sick parent.
The emergency fund not only provides you with the money to pay for these expenses, it also gives you “peace of mind” knowing that you can afford these types of financial emergencies. Not having an emergency savings fund is one of the reasons many individuals borrow too much money at high interest rates. For example, by saving for emergencies, the twelve million American adults that use payday loans annually would probably not have to take out eight loans of $375 each per year and spend $520 on interest (Pew July, 2012 Study).
Those with a savings plan are twice as likely to save successfully. Cash in those dusty jars of pennies. Pack your lunch instead of buying it at work. There are lots of little things you can do to fund your savings. Just be creative.
- Not sure what you should be saving for? Get started with one of our top five savings strategies.
- The first step to saving more efficiently is to keep track of what you spend and budget. There are many different ways to do this, try a few out and choose the system that works best for you. The key to saving more successfully is to find a system that works for you and to stick with it.
- 54 ways to cut back spending and save some cash.
- Find out how small amounts saved each month can equal large yearly savings.
- Having an emergency savings fund may be the most important difference between those who manage to stay afloat and those who are sinking financially.
- Not sure where to put the money you save? These accounts can help keep your money safe, secure, and growing.
- Receiving a refund this tax season? Learn how to use that money to pay down debt and save instead of buying something you might not really need.
Savings tools, links, and more.
- Interested in receiving helpful tips and reminders about your savings goal? America Saves launched a new free text message service, as part of Financial Literacy Month, to keep you motivated to save.
- This checklist is made up of characteristics of successful savers, which include debt management. It can serve as a useful starting point for evaluating one's savings preparedness.
Like your health, you should assess your savings annually to make sure you are saving for all the right things. Complete the assessment to see if you are saving adequately and create a savings plan.
- Videos on thinking and acting like a saver, saving for a large purchase, and information about credit scores.
- An archive of our quarterly newsletters. Features a true saver story, tips from savers, and news you can use.
- More information to help you save successfully.
Saving money, improving your financial life, building wealth. It all starts when you set a goal and make a plan to reach that goal. So what is your goal? Set up an emergency cash fund? Get out of debt? Make a down payment on a car or home? Sock away money for college or retirement?