Have you been wondering is $10,000 a good emergency fund?
Growing your savings and making sure you have enough available for a rainy day can be intimidating.
However saving the money can be easier than you think.
Here’s how to get started!
If you lost your job tomorrow, would you have enough in your bank accounts to survive?
Could you handle having to replace your hot water heater or even your vehicle if you had to do so tomorrow?
Unexpected expenses can devastate a family’s finances and during these tough economic times, it is more prudent to have emergency savings than ever before.
So what is a good amount to target for your emergency savings goal?
Here are some guidelines to keep in mind.
How Much Should You Have in Your Emergency Fund?
Before you pick a savings goal dollar amount, you may be wondering how much should you have in an emergency fund.
According to financial experts, you should have a minimum of 3 to 6 months saved up for an emergency, such as a job loss, medical bill, car repairs or other unplanned event.
Would $10,000 Be a Good Emergency Fund?
The truth is, that all depends on your budget and cost of living.
How much money does your family need to survive in a month?
Take a look at your finances and see how much incoming and outgoing income you have.
While there are most likely easy places you could trim your budget, especially if your financial situation became tight, the truth is that most of your expenses are likely fixed.
Your rent or mortgage will still need to be paid, your family will still need to eat, and some monthly expenses like electricity and water can’t be lived without.
Does having 6 months worth of income and expenses seem overwhelming to get started?
Start smaller and grow from there. Financial expert Dave Ramsey recommends savers start small, with putting $1000 into an emergency fund as their first savings goal. You can then grow that savings amount higher from there.
The perfect emergency fund amount for you is enough to help you survive tough times and the reality is that most Americans can’t even afford an unplanned $400 expense.
By having at least a couple thousand dollars in savings, and ideally at least 6 months worth of income,you can be better prepared to handle unexpected expenses and emergencies without having to go into debt.
How to Save $10,000 for an Emergency Fund
If you are hoping to get started on saving for your emergency fund, the easiest way to save is in small steps.
Break down your goal and you will realize how possible it actually is.
To save $10,000 in a year, you will need to save $833 dollars a month or just $27.40 per day.
This is less than the cost of a meal out at a restaurant. You can absolutely cut this amount out of your spending, or find additional ways to earn without changing your family’s lifestyle.
For less than the cost of a meal out daily, you can meet your savings goal. You just need to take a few steps to get started.
- Start Saving – This step may sound silly, but truthfully it can be the hardest step for most people. If you don’t have a high interest savings account, start one and add money to it regularly. Automate adding to your savings daily, or at least weekly and make additional deposits as you can. If you’ve recently received your stimulus payment or a tax refund, make sure you save a portion and add additional money to it as often as you can. Check out these tips on how to save $1000 fast as a way to get going.
- Cut Costs – If you can cut some of your monthly expenses, it will free up more funds to help you reach your savings goal faster. Take advantage of handy apps and programs like Trim to help you find ways to save. To cut costs on buying the things your family needs, I’m also a big fan of Ibotta, Checkout 51, Dosh and Swagbucks. By using coupons with money saving apps, I’m regularly able to save 30 to 50% or more at the grocery store without even really trying. Many of these apps even work with online and pick up orders, which can help you save even more. In a quick unplanned trip to Target yesterday, I was able to save nearly $50 on a $125 purchase. That money saved will allow me to add a little more to our savings and stretch our budget even further this month.
- Start a Side Hustle – If your regular methods of earning don’t allow you to make enough to start saving regularly, it might be prudent to start a side hustle. A part time gig that is as few as a couple hours a week can make a major difference in your family’s income and can allow you to save even more. Many hustles can be done whenever you have free time and can even be gigs that are done from home. I started writing and blogging as a way to stay busy when my husband was working the overnight shift. Over the years it’s provided lots of money for savings, as well as emergency funds for us to survive on as well.
- Live More Frugally – While you don’t have to completely go without, living more frugally and cutting some extra expenses can help you meet your savings goal more quickly. Your daily coffee habit can add up quickly and you’ll find big savings by getting your caffeine fix made at home. Skip eating lunch out daily in exchange for a packed lunch and skip other non-necessities to save more and spend less. Your budget and your bank account will thank you, especially when you do experience an unplanned expense.
- Review and Replace – As your financial situation changes over time, be sure to review your budget and make adjustments accordingly to your savings goal. Did you have to dip into your savings for an unplanned expense? Make sure you replace the money you used as soon as possible so that funds are available for your next unplanned expense.
- Grow Your Wealth – Already have an emergency fund in place? Start growing your wealth and planning for your future in other ways. Add to your retirement account or contribute to college savings plans for your kids. Start investing in stocks, even if you start out small with Acorns or another investing app. Those small contributions can really add up and can help you grow your future.
Having an emergency fund is an effective way to financially protect your family when unplanned expenses come your way.
It has helped my own family weather many job layoffs, major home and vehicle repairs and other large bills over the years.
Instead of stressing and scrambling, we were able to take these emergencies in stride and cover them with the funds we had in savings.
You will be able to handle the unexpected as well once you get started.
When it comes to how much to put into your savings, knowing whether is $10,000 a good emergency fund is up to you and your financial situation.
Your individual savings goal may be higher or lower, but in reality, something is better than nothing.
Start your savings goal small, such as $500 or $1000 and then grow your savings from there until you have a comfortable amount to rely on should the worst happen.
Kim Ritter is a frugal living expert, blogger and mom of two from small-town Iowa. What began as an effort to help her family save a few dollars a month has now transformed into a full-time passion to help other parents money. Visit her online at twokidsandacoupon.com and follow her on Twitter at @2kidsandacoupon for more ways your family can have fun on a budget.