It is crucial to build and have an emergency fund. A huge part of being financially stable and successful is having the peace of mind to know you can survive a crisis.

No, most individuals can’t afford to set enough money aside in a short period of time to survive the most severe of crises (months of unemployment, a necessary new vehicle, emergency relocation, etc.). However, having an emergency fund can go a long way to making difficult times easier and emergencies more manageable.

Before you start building your emergency fund, there are some things to know.

What is an Emergency Fund?

An emergency fund is a bank account set aside for large, unexpected expenses or financial emergencies.

That can include unforeseen medical expenses, vehicle or home repairs, major necessary purchases (ie, home appliances), or a large reduction or loss of income.

Why Do I Need an Emergency Fund?

A major financial hit can often put people into debt that takes time to climb out of. Or, lead you to pull money from savings accounts, making retirement goals harder to reach.

Where Do I Start?

Start small. What is an emergency you could see coming? Maybe you have to replace a major appliance or buy a full set of new tires. Figure out that cost and make that your initial goal.

Having a specific dollar goal is important because it’s trackable. Watching the fund grow over time can lead to positive feelings that reinforce the value of setting the money aside.

If you need help with a dollar amount, we suggest $500. Reach that point first. Then go toward three to six months’ worth of living expenses.

What’s Next?

Set up somewhere to put the money. The account should be separate from the bank account you use daily so that you’re not tempted to dip into your reserves. Don’t connect it to a checking account, so you won’t be tempted to easily move money over from it. Also, choose a savings account that offers rewards or a high interest rate.

After you have an account, set it up to automatically withdraw money from your paycheck straight to the account so you won’t be tempted to skip a deposit.

Now What?

Find a way to regularly check your savings. Whether it’s an automatic notification of your account balance or keeping a running total of your contributions, finding a way to track your progress can offer gratification and encouragement to keep going.

Also, as you reach certain benchmarks toward your goal -- say 25%, 50% -- reward yourself.

Finally, don’t touch it. This account is for emergencies only. Real ones. So, only use it in case of real emergencies.

You can find our savings account options at https://riverwind.bank/Personal/Savings.