When it comes to money, you have a lot on your plate. There’s finding a job that pays, sorting out your bills, creating a budget and saving for the future. Even with all those balls in the air, it's also wise to consider adding a key financial tool, if you can: an emergency fund.
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When it comes to money, you have a lot on your plate. There’s finding a job that pays, sorting out your bills, creating a budget and saving for the future. Even with all those balls in the air, there's another key financial tool to consider, if you can: an emergency fund.
Why build an emergency fund?
Think about what you can use earmarked funds for: paying a medical expense, losing your job or covering a roommate’s rent if they unexpectedly move out.
Not having enough money saved to cover an emergency can snowball:
Unpaid bills could potentially harm your credit
Charging an expense you cannot pay off may lead to costly credit card debt
Redirecting funds to an emergency could negatively impact other financial goals such as planning for an upcoming trip or building your retirement savings
How much should I save?
Expert advice suggests saving a range of three months to nine months worth of your total monthly expenses, based on your circumstances.
Consider: Do you have any of the following?
Start with a goal of three months and consider boosting your savings target for each item you check mark. You want to make sure you have enough saved that you can still provide for yourself (and others) and meet obligations.
What to do if that seems impossible
Not surprisingly, the more you make the more you can save. It’s harder to save when you’re already on a tight budget.
$500 — median savings for Americans making < $25,000 a year2
Cutting back on expenses such as dining out and entertainment
Looking for sources of extra income like freelance work
Putting away a small portion of your paycheck each month into a savings account. A little can add up a lot!
What to do in an emergency
Even if you haven’t hit your savings goal, you can still prepare for emergencies.
If you lose your job:
Could you pick up part-time work?
Get a roommate?
If you must unexpectedly pay a large bill:
Could you ask for a payment plan?
Could you consider a low-interest credit card?
You don’t have to wait to prepare for the unexpected. Getting a grip on your finances and having an emergency fund savings plan based on what’s feasible can be your starting point.
Find the right U.S. Bank savings account option for building your emergency fund.
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