How I Make My Emergency Fund Grow Faster

An Emergency Fund is used to help smooth out the potholes in life. A fully funded EF has about 3-6 months of expenses saved up. I only plan to use it when something unplanned happens e.g. car breaks down, medical, job loss, etc.

When I get paid every 2 weeks I transfer $50 from my Bank of America checking account to my BOA savings account. I have it set up so that it’s easy to get to because it’s for emergencies. If something unplanned happens and I need it right away I can’t wait for 3 days to have it transferred from my ING account. I also have it set up that way because BOA has Keep the Change, so every purchase I make gets rounded up and the change gets transferred to my savings account. As a result I have the $100 a month I put in it plus all of the extra change that gets put in which makes it grow that much faster.

If you don’t use BOA or your bank doesn’t have a program like that, just set up an automatic transfer of $5 every 3 or 4 days. You won’t miss it.

How do you have your emergency fund set up?

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{ 10 comments… read them below or add one }

friend

I actually set aside one hour of pay, in my mind I do the first hour … that’s when I am least productive of everyday into savings. I super easy, way as well.

Another way?

If you work for a company you can have them deduct that 50 dollars automatically out of your paycheck to set aside for taxes. If you never use it… it just equals a bigger tax return. Also, it makes it literally untouchable so you won’t even be tempted to touch it!

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Kevin

I like that Idea about setting aside an hour of pay. I never thought about that before. I agree about having the company set aside the money, out of sight out of mind. Thanks for the tip

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Andrew @ Money Crashers

This is definitely one of the best ideas for building up an emergency fund. Once you get in the groove of moving over a set portion of your paycheck every time and have adjusted your living standards (which really shouldn’t be affected by something like $50 in the first place), you’ll be amazed at the savings. It’s so easy to do, you don’t need to think about it, and you’ll be happy you did it when you need the money.

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Aloysa

I have 1K fast emergency access in my bank. And working on a 3-6 months emergency in ING account. I need to have money somewhere else not easily accessible because it makes me think twice if I really need to spend money on something.

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Kevin

yea, easy access can make it harder not to buy something that you want.

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Car Negotiation Coach

because i’m self-employed, i probably need a bigger EF than most people. I save, save, save, and save some more. I’m so attached to having an EF, if I were to have a serious emergency it would be incredibily difficult for me to take anything out of it (what if i had a second emergency :) )….i think i’d go to ramen noodles and sleeping on bark benches first.

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Kevin

That is a good point and just goes to show you everyones situation is different, so there is no one size fits all solution.

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James Fowlkes

Automation is definitely the key to a fully funded emergency fund. Monthly automatic transfers to ING Direct work well for me. Hey, don’t forget everyone gets a 2% raise next year from the reduction in Social Security taxes. A perfect way to REALLY kick your emergency fund savings into high gear is to calculate it, or just review the line item on your paystub, and setup and automatic transfer of that amount into your emergency fund. You never saw the money anyway, so you know you don’t need it to “get by”. So, you may as well save it!!

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Kevin

exactly, if you never had it before then you won’t miss it.

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Matt Wegner @ Financial Excellence

I love the idea of paying yourself first and the automatic transfers. You don’t even think about it then. Our emergency fund is static. We set a target amount and once we reach the target we stop putting money in so we can invest more. If we dip into the emergency fund, we reduce investing until the emergency fund is replenished.

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