There’s no such thing as being too prepared in life, especially for millennials, for whom laying the building blocks for a strong financial future is of important concern. The hardships of paying bills, making ends meet, finding a job, and balancing everything in between, can add layers of anxiety that makes life a lot less fun.
Having an emergency fund is essential, so that millennials don’t have to take the first loan or credit card offer they come across. As a millennial, you should always have an accessible savings account or emergency fund that can be used to provide a financial safety net in the case of job loss, a medical emergency, or a car repair.
How to Build an Emergency Fund
If you’re interested in creating an emergency fund, there are a few key steps to take:
Create a Budget: Before you can begin setting money aside for an emergency fund, you’ll first need to create a budget for yourself. This will help you differentiate between what you “want” and what you “need” in life. Not only will this budget help you better understand your finances, but it’ll ultimately help you save money for other more practical necessities.
Determine Your Goal: Your goal should be to save enough money to cover 3-6 months of essential bills while factoring in your current income. This should give you a good foundation to build upon both emotionally and financially.
Set Boundaries: Once you have determined your goal, you will also have to set a few boundaries in order to achieve it. Don’t use your emergency fund to pay for entertainment and leisure activities, such as shopping trips and vacations. Stick to a strict budget and force yourself to keep up with it in order to reach your emergency fund goal.
Shop Around: Don’t be so quick sign up for the first savings account you come across. Shop around for the best rates that are not only low-risk, but also offer a high yield. Utilizing a few banking websites to compare rates, fees, and terms can make all the difference. Make sure that you stay away from high-interest credit cards, and opt for accounts with no monthly fee.
The Benefits of an Emergency Fund
The number one benefit of having an emergency fund is the comfort and security it provides. Millennial’s no longer have to be concerned with financial predicaments that can’t be paid or certain scenarios that could lead to massive debt. Some other advantages to having an emergency fund include:
Prevent Monetized Debt: Credit cards, internet loans, and debt consolidation can be easily achieved without much thought, and that’s why having an emergency fund is so important. Whether you’re confronting an emergency, or have something nearby that you need right away, having an emergency fund will prevent you from running to the nearest store for a loan.
Create Surety: An emergency fund eliminates the stress of money troubles and the fear of the unknown. When you don’t have to worry about any finances at all, it makes you more secure and self-assured. No longer would you be stressing over one more bill or loan.
Cushion Unexpected Happenings: An emergency fund allows you to use it however you like. Whether it be for a medical emergency, a car repair, or a plane ticket, you can use the funds where and when needed.
Final Thoughts
Having an emergency fund is essential, and something all millennials should take the time to begin investing in. Having an emergency fund will provide you with more security, surety, and prevent you from taking out monetized loans, helping you keep your finances in check. Consistently and strategically set money aside for your emergency fund, and you’ll be surprised how quickly it can add up.
