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Create an Emergency Fund

Surprises are scary when you do not have control of your finances. An unexpected car repair, a medical procedure, a job loss, or any other financial emergency can quickly send you spiraling into new or more debt, wiping out any progress you’ve made towards taking control of your money.

Creating an emergency fund is another way to make your money work for you because it means you have planned for surprises. If an emergency does come up, you can put the money in your fund to work and regain control of the situation.

Building an emergency fund can take time. Ideally, you should save the equivalent of three to six months’ worth of income. But every little bit you can set aside will help. If you are still paying off debt or don’t have much wiggle room in your budget, set aside whatever you can in a “surprise expenses” category in your budget. At the end of the month, transfer whatever is in this category to a separate savings account.

Put your emergency savings in a high-yield savings account, which will earn more interest than a regular saving or checking account. This means that the money you save will make money while it’s sitting in your bank account. If your bank doesn’t offer high-yield accounts or you live in a rural area without a bank, look for online banking options to open an account.

Once you are out of debt or have more money free money in your budget, you can set up larger recurring contributions to grow your emergency fund even faster.

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