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Six impactful ways to boost Your emergency savings
Emergency Savings

Six impactful ways to boost Your emergency savings

In this series, we explain the ins and outs of setting emergency savings from soup to nuts. The week, Megan provides some effective ways to boost your emergency savings.

Perhaps you are an expert at stashing away money for life's unexpected financial surprises. Maybe after using the "set it and forget it" method for your deductions you checked your account and were pleasantly surprised at the growing number. Or perhaps you are feeling the pressure to bolster your emergency account now more than ever.

There are a few unique and non-traditional ways to boost your emergency savings account beyond just monthly deductions, here is how.

Eliminate Budget Sabotaging Expenses

Take a closer look at your monthly spending habits. Even if you are frugal you are likely to find a few budget busters, or expenses that you can likely live without. Things like cable television, eating out, and gym memberships can sabotage your financial plans.

It may seem like you have cut down your spending to the bare necessities but some expenses have cheaper alternatives or may not be vital.

It may seem like you have cut down your spending to the bare necessities but some expenses have cheaper alternatives or may not be vital. Consider trading in your cable subscription for a cheaper streaming network or simply unplugging, cook most of your meals at home and pack your lunches, and finally, use resources like YouTube for workouts or get outside instead of signing a contract with a gym.

By reviewing your spending habits and making a few key lifestyle changes you can start devoting more money to your emergency savings account.

Get a Side Hustle

If you have already stretched your budget as far as you are willing to, then consider finding a side job. It can be a freelance opportunity, waiting tables, or even driving for a rideshare company; anything that will bring in a little extra cash.

However, it is important not to fall prey to lifestyle inflation and let your additional earnings go towards retail shopping, a latte, or any other financial splurge. Remember why you decided to put in the extra hours and designate your new income for your emergency savings account.

Sell Your Stuff

Do you have items in your garage gathering dust, outfits in your closet that have yet to be worn? All of these things can be sold for cash. Reevaluate what you regularly use and which things you can stand to part with.

Facebook Marketplace, Craigslist, and eBay are all possible resale options. In addition to tidying up and getting rid of clutter, you will be able to add any earnings to rainy day account.

Transfer to a Money Market

Deciding where to put your emergency savings account can be tricky and there are two different points of view on the topic. Some advocate for keeping your account with a bank as a traditional savings account, while others argue it would be better off in a money market or high yield savings account. Each has its own benefits and drawbacks.

Traditional savings accounts, usually at physical bank branches, typically earn low to moderate interest rates and may have either minor fees or no fees at all. The benefit to a traditional savings account is that you have easy access to your money and can withdraw it on very short notice. The predominant drawback is that the interest earnings are typically so small that you will not see your account grow by very much overtime.

Money market accounts are a form of high yield savings accounts and typically gain interest at much higher rates than traditional bank savings accounts. Even though you will see your money grow at an increased rate just by collecting interest, you may have to maintain a higher minimum balance and there may be stipulations concerning how and when you can make withdrawals.

Some people prefer to think of their emergency savings account as an insurance policy and are fine with not gaining vast amounts of interest, others enjoy the benefits of watching their accounts grow simply due to interest accruals and accept the trade-off of ease of access for the boost in wealth.

Reevaluate your Tax Withholdings

Many of us are guilty of setting up our tax withholdings so that we absolutely won’t owe anything at the end of the year, and in return receive a decent refund check. And honestly, who doesn’t enjoy getting a large tax refund check in the mail?

However, it may be time to reevaluate your tax withholdings. A large check essentially means that you may have overpaid during the previous year and are effectively giving the IRS an interest-free loan. You want to avoid penalties and owing at the end of the year but you also want to avoid the large return.

It is better to have just the right amount of deductions taken so that your return check is modest and you receive larger portions of your earnings throughout the year to invest and accrue interest on.

Track Your Expenses and Savings (and move money when you can)

In the beginning, it can be helpful to take the “set it and forget it” approach, you will not have to worry about regularly contributing to your emergency savings account and can determine your budget and spending amounts without the temptation of skipping payments. But when you decide to get serious about growing your emergency savings account you can do more than just contribute a monthly baseline amount.

There are likely a few times throughout the year when you receive bonuses, monetary gifts, or reimbursements. These amounts are not factored into a regular monthly budget and therefore don’t affect the amount of your usual savings account deductions.

It can be beneficial to closely track your expenses and income on a monthly basis and move money when you can. For example, if you receive a holiday bonus consider allocating a larger portion for your emergency savings account that month rather than spending it.

These are just a few tips and tricks that may help you contribute more money to your emergency account and assist you in saving enough for more than just six months of expenditures and bills. The greater the amount in your emergency savings account the greater your peace of mind.

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