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Save for an Emergency Fund

It’s important to learn how to save for an emergency fund. Although, that’s much easier said than done.

Saving at any level makes all the difference in your financial wellbeing and is a huge help when you need access to cash. Furthermore, you don’t have to borrow money if something happens to you or your family.

Here’s a helpful list of handy tips you can try to save for urgent costs and start building a safety net for rainy days.

Why have an emergency fund?

In June 2021, Channel 7 reported that almost 1/3 or 31% of Australians don’t have enough reserve cash to cover a month’s worth of living expenses. This is according to research by comparison site Finder. Compare the Market also said in 2019 that 13.4 million Aussies don’t have emergency savings to fall back on if they lose their job.

An emergency fund can provide you a safety net for when life throws a curveball, whether your car breaks down, an emergency vet procedure, or paying for medical bills. It creates a financial buffer to keep you afloat in times of need, so you don’t have to always rely on borrowing money.

How much to save

The amount to aim for when you save for a rainy day would depend on your basic living costs and expectations in getting through an emergency. The minimum 3-month rule is a common measure, where you have enough cash to cover your day-to-day expenses for at least 90 days.

Other sources suggest saving 3 to 6 months of regular expenses or transferring $20 to $50 a week, which means you could save $1,040 to $2,600 in a year.

Where should I keep it

An easy access to cash is important for an emergency that could pop up at any time. It’s also better to have a separate account for your emergency fund so you don’t feel tempted to dip into the amount for casual spending.

Ideally, you would want a savings account with high interest and no ongoing fees for your bundle to grow while in hibernation. However, there are some banks that will decrease your interest rate if you withdraw from your account, so make sure you only do it when necessary.

How to build an emergency fund

There are lots of ways you can save for an emergency fund, which may include:

  • set a monthly savings goal
  • automate your savings
  • keep your change
  • maximise your offset account
  • transfer some money from tax refund straight into your savings
  • eat at home more often
  • plan your meals based on special at the grocery store
  • try alternative brands
  • make a shopping list so you won’t be tempted to fill your cart
  • sign up to coupon sites
  • cut out premium subscriptions, such as streaming services, magazines, and other services you could live without
  • sell pre-loved clothes and furniture on online marketplaces or community groups
  • while spending more time at home, modify your budget on going out, transport, takeaway coffees, and lunches where some money goes into your emergency fund.

If you liked our “Save for an Emergency Fund” and find it useful, check our blogs regularly for more information on how to get out of debt and updates on the best budgeting apps in Australia.