6 Smart Ways to Finally Set Up That Emergency Fund

couple concentrating on a billWhen it comes to a minor financial emergency, like needing a $500 car repair, could you handle it without having to borrow money or use your credit card? If you can't, you are in surprisingly good company.

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According to a recent study, 62 percent of millennials report not having an emergency savings account and having to rely on credit cards or family members if a sudden expense comes up. 

According to personal finance expert Latisha Styles, "the great recession stunted the financial growth of millennials, and so many millennials have struggled more to get financial footing."

Millennial moms, especially those with younger children, are often faced with a double burden, notes Styles: the struggle to pay back student loans while also having to pay for the cost of childcare. This one-two financial punch is "causing a cultural shift and making living with families for longer more acceptable," says Styles. It is also causing some families to struggle to figure out their financial priorities and how to start saving.

More from The Stir: How Millennial Are You? (QUIZ)

If you are one of the 62 percent without savings, Styles recommends taking the following steps to build your own financial safety net:

  1. Take advantage of cohabitation. If you are already living with your family, don't move until you have an emergency fund of "at least $1,000."
  2. Embrace the power of the automatic transfer. Set it up so that your bank automatically transfers part of every paycheck into a savings account, even if it is only $25 or less. You've got to start somewhere!
  3. Manage your biggest expenses. "You can still have that latte, but you better pay off your car and drive it until it dies," Styles says.
  4. Focus on savings before focusing on debt. Pay the minimum on your credit cards and student loans but put every extra penny in savings until you hit the $1,000 mark. Then, you should "get aggressive about debt pay-down."
  5. Put surprise cash to work for you. If you get a tax refund or bonus at work, use that to jump-start your savings fund.
  6. Be a smart home-buyer. Housing is the biggest single expense for many families, so "don't buy more house than you can afford," and don't buy a house without an emergency fund in place.

After taking a hard hit from the great recession, those of us in our 20s and 30s might be a little financially behind. But don't assume you'll start saving later. Styles advises, "Start now, and remember you don't have to go to extremes to be able to save."

 

Image via iStock.com/Wavebreakmedia

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