Check Out These Savings Account Benefits You Can Reap Even During a Pandemic!
Conventional recommendations state you should have an emergency fund equivalent to three to six months of your expenses. If your monthly expenses are $3,000, this means your emergency fund should be between $9,000 and $18,000. When you're struggling to cover your monthly bills, the thought of saving so much money may feel overwhelming.
Fortunately, it's possible to create a sizeable emergency fund by making small changes to your spending habits. Savings account benefits include reducing the financial stress in your life and allowing you to better handle unexpected expenditures. Here are some small, manageable ways to start adding to your emergency fund and realize savings account benefits.
1. Break Your Goal into a Series of Smaller Goals
So that your goal feels more doable, split the amount of your ideal emergency fund into smaller increments. Your savings account benefits will begin even if you have a small emergency fund. If you want to have $9,000 in your emergency fund, $1,000 is an excellent starting point.
2. Know How Much You're Spending (and Make Adjustments)
Your next step is to examine your spending habits to see where your money is really going and make adjustments so savings account benefits are a reality. For example, a review of your bank statement might report that you're spending $800 on groceries, $200 on dining and $100 on clothing each month.
Once you understand your spending habits, decide where you want to spend less money. If you can lower your grocery bill by $25 each week, this is $100 you can add to your emergency fund on a monthly basis. Should you decide to spend $10 less each week on dining, this is an additional $40 you can send to your emergency fund. Small changes to your spending habits add up.
Savings account balances tend to increase when you segregate your money so you're less likely to spend it. You can also automate the savings process by sending the difference in your monthly spending directly to your account via direct deposit.
3. Create a Savings Snowball
One of the primary savings account benefits is the ability to make frequent deposits. Use this benefit to create a savings snowball.
A savings snowball consists of the additional money you find in your budget by spending less. Overtime, as you pay off debt, lower more of your expenses, or boost your income, you add these "snowflakes" of money to the snowball. For example, assume that you currently send $35 a week to your emergency fund. You start receiving mileage reimbursement at work; this adds $15 to your snowball. You're able to pay off a small medical bill and can add another $10 to your snowball.
These two "snowflakes" have easily upped your snowball from $35 to $60 a week. Over a year, this is an extra $1,300 in your savings account.
Learn More About Savings Account Benefits
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