Sometimes life can give you heaps of challenges that may seem difficult to overcome. Big or small - from a car accident to an emergency health situation - we can't always anticipate these incidents. However, there’s always something that you can do to prepare for unexpected situations. Saving money in an emergency fund will act as your safety for unexpected incidents.
Without extra funds to back you up in emergencies, you could end up borrowing money and delaying your financial goals. Avoid this by taking action now and saving money in an emergency fund. Get back on your feet fast when life puts you on your knees. Here are 7 steps to save money for an emergency fund.
Step 1: Determine the size of your emergency fund.
Generally, planning 3-months worth of expenses is good but how much you’ll need in times of emergencies depend on your circumstances. The more that you save up, the bigger the safety net. Disciplining yourself to regularly allot a portion of your income to the emergency fund will lessen the chances of borrowing money in the future when an emergency arises.
Step 2: Open an emergency fund account
It helps to open an emergency fund account that can safely keep your money while you're not using it. New Zealand has many competitive banks that offer a simple savings account with low to a zero account fee such as Westpac
Step 3: Set-up automatic payments to your emergency fund
After opening a savings account for your emergency fund, you can now set-up automatic deposits so that a portion of your money can regularly go to the fund and you won’t be tempted to spend it! You can do this by visiting banks with automatic payments such as Kiwibank online or in-person.
Step 4: Invest in insurance
Your insurance should cover health, life and other essentials. Meaning, the policies should correspond to situations that are most likely to occur. New Zealand has many insurance types from car and travel, to health and even pet insurance. If you’re thinking of getting any types of insurance soon, you can head on to our comparison page to see various offers from NZ providers. Insurance is a form of investment because you’re putting in money and though you won’t immediately reap the benefits, you can do so in particular situations in the future.
Step 5: Look for ways to save more
You need to consider your expenses - from a daily to a yearly basis, from the fixed to the variable costs - and identify which you can minimize so that you can save more. Fixed costs such as broadband and other utility bills bite a chunk off our monthly budget if you’re not in a plan that suits your needs. Consider if you’re in the right power, mobile, or broadband plan and see how much you can save with others by comparing various deals. It’s never too late to make a switch if you think that your current plan isn’t working for you.
Step 6: Make a monthly budget and stick to it.
To save money, you’ll need to know how much you only need to spend. The monthly budget is like your battle plan on how to maximize your resources and minimize your costs. It should align with your financial situation and the amount that you expect to put into your emergency fund. Reviewing your monthly budget also helps you assess whether or not you’re saving enough, and if there are adjustments to make.
Step 7: Resist the temptation
Because you’ve opened a savings account for your emergency fund, you need to stick to its purpose and determine when it’s supposed to be used. You’ll need to resist the urge of spending on luxuries and things that you won’t really need.
glimp’s comparison tool for various NZ deals can help you to save on power, mobile, broadband, insurance, and many more. By comparing deals, you’ll know which plan suits you best. The last thing that you’d want when you’re striving to save monthly for an emergency fund is being in the wrong plan. Get the right power, mobile, and broadband plan, and insurance suited for your money saving goals so that you can bounce back fast and think on your feet when the going gets rough!
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