Growing your emergency fund doesn’t have to involve complicated decisions or extreme sacrifices. You can boost your emergency savings right now by following these five easy tips.
1. Put it in a High-Interest Savings Account
Upgrade your emergency fund from a basic savings account to a high interest savings account (HISA). A HISA earns 60 times as much in interest as the basic options, which means your savings will grow 60 times faster.
Some of the best HISAs on the market today promise 5% return. Compare this to the 0.08% of the basic savings account.
While searching for the best HISA, you’ll want to make sure there aren’t any withdrawal penalties or balance minimums. Your emergency fund can fluctuate in size as you use it, so you don’t want to be penalized for dipping below a certain figure.
2. Shop Around for Promotions and Deals
Many HISAs are free, which means there is no harm in having more than one. In fact, opening new HISAs at strategic moments can help you earn even more. Some banks offer promotions for new customers, offering to match deposits or award bonus interest rates for a specific time. Others will randomly increase their interest rates for existing customers throughout the year.
You can move your emergency fund between these accounts to take advantage of the promotions, timing these moves to earn the highest interest at all times.
3. Back it Up with a Line of Credit
One day, your emergency fund might fall short of what you need in an emergency. Don’t panic — it can happen to anyone, no matter how prepared they are.
Preparing for this eventuality can help you pivot faster. You can back up your emergency fund with a line of credit in these situations. To learn more about how a line of credit fits into your emergency plan, visit Fora Credit and read about what you need to qualify.
Once you pay off your line of credit, you can keep it on standby for the next time your emergency fund winds up empty.
4. Automate It
An emergency fund has the best chance of growing when you make frequent, regular contributions. Automating these contributions means you’ll never forget to save for the month; your bank will transfer the funds like clockwork.
Sit down with your budget to determine how much you can bookmark for your automatic savings plan. Schedule these contributions with your paycheque, so these transfers are painless.
5. Let it Grow
Last but not least, the best thing you can do with your emergency fund is to pretend it doesn’t exist.
As it grows, you’ll have an account with a lot of money in it. Ideally, it should cover three to six months of living expenses eventually. All that cash can be tempting, especially when you have your eyes on a new sound system, computer, or lawn mower.
Withdrawing funds from these savings for non-emergencies means you won’t have as much help in an emergency. It almost guarantees you’ll have to put more on your line of credit, too. So, try not to touch these savings until you really need them.
See how easy these tips are? You can boost your emergency fund simply by automating contributions to a HISA. Give these tips a try in the new year ahead!
