Here’s How Much Money You Should Have In Your Savings Account At All Times
When it comes to saving money, it can be confusing to really understand how much you should stash away each month. Between brunch on Saturdays, networking events after work and Seamless orders when you don’t feel like cooking, our spending can add up, pushing saving to the wayside. It’s important though to make saving a priority in case of an emergency. Here’s what that means, how much you should save and more so that you’re always prepared for whatever comes your way — including that sale at Kate Spade.
What is an emergency fund?
First things first: the emergency fund. You may have heard about this, but never really looked into it. An emergency fund is the amount of money you put away in a savings account that will cover your living expenses in case something, like a job loss, happens. It’s basically a safety net that will give you peace of mind if you’re ever down on your luck and need to cover a few months of expenses.
How much money should I save in an emergency fund?
According to Wells Fargo, you should aim to have three to six months’ worth of expenses saved in your emergency fund. In reality though, you’ll want a little more than that in order to prevent the need to drain your savings account completely. Having enough money to cover your everyday living expenses during an unexpected emergency is great, but starting from scratch once it’s over isn’t easy either.
Some other experts say it’s smart to save six to nine months’ worth of expenses in your emergency fund. With six to nine months saved, you’ll have that added cushion to help you get back on your feet.
Our best advice is to save as much as you can prior to that emergency. Since it could happen at any time — car repairs, hospital bills, last-minute move — it’s important to never stop growing your emergency savings.
How do I know how much I should be saving every month?
Now that you know you’re aiming to save at least six to nine months’ worth of living expenses, it’s important to know that it’s a different amount for everyone.
Let’s say you pay $1,000 in rent, $300 for your car and car insurance, $200 for food and $100 for medical insurance on a monthly basis. That’s a total of $1,600 per month. If you’re aiming to save six to nine months’ worth to cover those expenses, you’ll want to have a savings goal of $9,600 to $14,400 in your savings account.
Once you know your goal, start working toward it. Analyze the amount of money you bring in every month and the amount that you spend, and figure out how much you can reasonably afford to save every month. After calculating how much you can save every month, make it a priority.
How can I save money faster?
If you realize you’re only able to save a small amount per month, such a $100, consider a few ways that you can grow that amount.
2. Save your money in a high-interest savings account. You can grow the amount of money you have in a savings account by literally doing nothing if you choose the right financial institution. For instance, let’s say you have $1,000 saved in a bank that pays you 0.09 percent interest per year. After one year, you’ll earn 90 cents in interest. If you were to move that money into a bank that pays 2 percent interest per year, you’d earn $20 in interest after one year. It’s basically free money.
3. Schedule automatic transfers from your checking account to your savings account. By automatically transferring your money every month, it’ll come out of one account before you even have a chance to think about spending it instead.
4. Stash away windfalls. If you come into a bit of money, such as a tax refund check or a large sum of money from a relative, put it into your savings account ASAP. Every little bit counts toward your savings goals.
Whatever you do, don’t stop saving.
If you end up hitting your savings goal, don’t stop saving money. It’s okay to reduce the amount you stash away per month, or use some of your extra funds to pay down debt, like credit cards and student loans. You’ll feel secure in your personal finances by making smart moves with your money, which will allow you to enjoy drinks with friends, a new Kate Spade purse or tickets to a concert more often.
Don’t stop living your life, just keep saving for it.
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