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Building Your Emergency Fund
A Comparison of Savings Options
Start your savings by creating an emergency fund. Your emergency fund is the
Savings Option Advantages Disadvantages financial equivalent of a spare tire-- something you need to have and hope to never
Traditional Savings Account Easy access to funds at local Very low interest rates use. With an emergency fund you have a sense of security and peace of mind, knowing
- Savings account at local provider branches No checks or ATM withdrawal that you have something to fall back on if something happens... and it will happen.
Low minimum balances Most experts recommend you have at least 3-6 months of your living expenses saved
Good starter accounts for emergencies. If that seems impossible, start smaller and aim to save $1,000 as
Online, High-yield Account Higher interest rates Service is limited a start. The important thing is to leave your savings alone and resist the temptation to “borrow” from it for
- Business is only online, no local Fees are usually lower May take 1-2 days to get the money monthly expenses. That’s usually one debt you don’t repay. Put your emergency fund in a savings account
branch from the account where you can get to it when you need it. A six month CD is not the place for this money!
Hard to do cash deposits Start by Creating a Budget - If you don’t know what you’re spending every month, or where your money goes,
Certificate of Deposit (CD) Fixed rate of interest, is higher Money may be locked into low rate How can you put together a realistic emergency fund? Sit down and really look at the amount of money you
have coming in and where it is going each month. Find ways to squeeze that savings out of your checking
- Money is locked in at a specific than traditional accounts as interest rates rise and into savings.
time for a set rate You may be able to lock into Penalties for withdrawing funds
- The longer the time frame, the higher interest rates for a early Look for Ways to Save - There are always ways to save
higher the interest rate longer time If you have direct deposit of your paycheck, set it up so a portion goes directly into your savings account.
Money Market Account Higher interest rates Requires a higher initial You’ll be surprised what you can do without when you don’t see the money in your checking account.
- Higher interest rate savings Ability to write checks and investment Put all extra money (bonuses, tax refunds, gift money, rebates, loose change jar) into savings.
account with more restrictions withdraw funds Higher balances required to avoid Set up an automatic transfer from your checking to savings each month.
service charges
Reduce your the amount you spend
Takes longer to receive money
Limited ability to withdraw funds • eat out less, take your lunch, skip the vending machines and take your own snacks
• get rid of cable TV, spend less on entertainment
The Habit of Saving • put in energy-efficient light bulbs and save $60 a year, turn off the lights
Interest rates on savings accounts are at an all-time low, many paying less than 1%. You’re not going to • buy generic brands.
get rich putting your money in a savings account. What you are doing is building good habits of money
management, learning to save Once you’ve established your emergency fund, you’ll have more freedom and security. From there, you can
money for a goal instead of spending get out of debt, save for a major goal like a house or an education.
what you have. On payday, the first
thing you should do is pay yourself. Exercise - Your Emergency Fund
Put money into your savings account
and don’t touch it. Pretend your Take a look at the budget you created in Pamphlet 1 - How Money Works. What’s your bottom line? Income
savings account doesn’t exist. __________ Expenses __________
Resist the temptation to take it out How much do you need in your emergency fund for a 3-month buffer? $ _____________
and spend it right away. Get excited
about watching the balance in the
account grow each month.
