Life is full of curve balls. But there are two things you can count on. First, expect the unexpected. Second, the unexpected almost always comes with unplanned costs.

 Your car breaks down. Your washing machine has a glitch. Or, heaven help you, your phone dies while it’s still under contract. On the more serious side, you could get laid off from your job or suffer a serious injury that prevents you from working.

 In any of these scenarios, you would likely need to turn to your emergency savings. The problem is that 78 percent of full-time workers in the U.S. are living paycheck to paycheck, making it increasingly difficult to put aside enough money for emergencies. In fact, only 56 percent of us are able to save $100 per month.

 The uncertainty of planning for the unexpected can be stressful, especially if you’re constantly wondering whether you’re saving enough. Take these three steps to put your emergency fund on track before the next curve ball comes your way:

  1. Get Real About How Much You Need

 Financial experts recommend that you set aside savings equal to three to six months’ worth of expenses as an emergency fund. To determine your number, add up what your family is spending each month. Include every non-negotiable expense, such as rent, utilities, food, transportation, and cell phones. Then, set a savings goal of at least three times that amount. For a cushion that will help you feel secure no matter what happens, keep saving until you have six times that amount.

 Because it can take some time to build up to that, start off with a smaller goal. Financial guru Dave Ramsey recommends a $1,000 starter emergency fund. Doing so helps you build some momentum by accomplishing a small goal quickly. It also protects you while you build your full fund (because something will certainly go wrong if you have nothing saved up).

  1. Set Boundaries

 Set up a separate emergency fund account so day-to-day expenses don’t chip away at your savings. The best options are a basic savings account or a money market account. Money market accounts typically have higher interest rates than savings accounts, and both are fully insured by the FDIC up to $250,000.

 While there are other higher-interest options, accessibility should be the main goal for your emergency fund. Savings vehicles that focus on maximizing interest often come with access restrictions. For example, a certificate of deposit (CD) could require you to leave the money in place for several months or face a penalty for early withdrawal (which won’t do you any good if an emergency pops up and you need that money now).

 Once you’ve established the separate account, set boundaries to ensure you’ll only tap into the funds for true emergency needs. Ask yourself three questions: Is it unexpected? Is it truly necessary? Is it urgent? If you can’t answer “yes” to all three, it’s not worthy of your emergency savings.

  1. Limit Your Risks

 Savings and money market accounts are good choices for more reasons than easy access. You also want to keep your emergency fund safe from too much market volatility. Even if you can access the money in a mutual fund within a day, it’s subject to risk if the market dips. An emergency situation would be compounded if the market value of the fund were reduced at the moment you needed to tap into it.

 An even riskier plan is relying on your credit card for emergencies. Credit can create a false sense of security and could end up costing you more as you pay back the accrued interest over several months.


Ready, Set, Save

 Once you’ve set your target and opened an account, all that’s left to do is save. Carving out “extra” money can be difficult, but automating your deposits makes it easier. Set up regular transfers each month or each payday to automatically move money from your checking account into your emergency savings account.

 It’s OK to start with a small amount — say, $25 per month. It adds up over time and earns interest along the way. If you can, push yourself to save a little more. Just $20 per paycheck nets you $520 in annual savings when you’re paid every other week.

 Still think saving sounds like an impossible task? Start by setting up a budget to see where all your money is going, and think about areas where you can cut back. For example, try cutting the cord and going cable-free for a year — you might end up with an extra $1,000 or so by the end of the year, which can go a long way toward establishing your emergency fund.

 Making smaller sacrifices (like cutting down your coffee shop visits from every day to just once or twice a week) can also add up. If you save $20 per week by grabbing free coffee at work rather than splurging on Starbucks every day, you can save over $1,000 in a year. And if you also pack a lunch for work rather than eating out each day, you can save at least that much that way, too.

 Also, remember that these budget cuts won’t be permanent. Once you’ve built up a healthy emergency fund, you can go back to enjoying your old habits (though it’s always a good idea to still cut back where you can so you can save more for the future).


Ready to save? The Callaway Bank can help you reach your goals with account options, no-charge auto transfers between accounts, and easy access to your money when you need it. We’re honored to be there for you and your family for the #MomentsThatMatter, as well as get you back on your feet when the unexpected happens