WEBVTT - Second Cup: How to create an emergency fund

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<v Speaker 1>Welcome to Before Breakfast, a production of iHeartRadio. Good Morning,

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<v Speaker 1>This is Laura. Welcome to the Before Breakfast podcast. Today's

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<v Speaker 1>tip is about how to build up a small emergency

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<v Speaker 1>fund quickly. When you have at least some money in

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<v Speaker 1>the bank, you can be far more calm about life's problems.

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<v Speaker 1>To help me with this tip, I invited Joel and

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<v Speaker 1>Matt from the How to Money podcast to share some strategies.

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<v Speaker 1>They're with me here now as they will be for

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<v Speaker 1>a few episodes this week. So Joel and Matt please

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<v Speaker 1>take it away well do.

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<v Speaker 2>Thanks for having us Laura. And with a potential recession

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<v Speaker 2>on the horizon, cash is most definitely not trash. Having

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<v Speaker 2>money socked away in a save us account is massively

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<v Speaker 2>important for financial emergencies that might come along. And if

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<v Speaker 2>you had noticed, rates for savings have been moving up

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<v Speaker 2>in a major way, thankfully, So how much should you

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<v Speaker 2>have saved? What your initial savings goal? We would say

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<v Speaker 2>should be to have two thousand, four hundred and sixty

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<v Speaker 2>seven dollars on hand. And yes, I know that.

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<v Speaker 3>Is oddly specific, Yeah it is, but there is actually

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<v Speaker 3>a reason for that specificity. First, having a particular and

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<v Speaker 3>peculiar number like that, like two four six seven, that

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<v Speaker 3>sticks in your brain, right, it allows you to remember

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<v Speaker 3>the goal that you're aiming for. But second, research economists

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<v Speaker 3>they've found that just a couple of years back, that

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<v Speaker 3>this is a magical number that allows folks to pay

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<v Speaker 3>for almost any emergency that might pop up. It's sort

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<v Speaker 3>of like a financial floor, if you want to think

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<v Speaker 3>about it that way. Now, it's not going to pay

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<v Speaker 3>for a brand new engine in your private jet, it's not.

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<v Speaker 3>It may now you even pay for a new engine

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<v Speaker 3>in just your your regular old suv. But it will

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<v Speaker 3>provide enough financial margin to allow you to weather most

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<v Speaker 3>money storms that that can and will come along.

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<v Speaker 2>Yeah, it's also important to mention that not too many

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<v Speaker 2>things should fall under the classification of emergency. Right. Holiday presidents,

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<v Speaker 2>for instance, are not an emergency. You should be planning

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<v Speaker 2>and saving throughout the year for those new tires. Same thing, Right,

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<v Speaker 2>it shouldn't be shocking to you that those bald pieces

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<v Speaker 2>of rubber that you're driving on every day need to

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<v Speaker 2>be replaced. Saving up for those over time is going

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<v Speaker 2>to alleviate any financial shock that you might experience. Home

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<v Speaker 2>maintenance also, right, you might not know exactly what's coming

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<v Speaker 2>down the pike. But you know, it's of course inevitable

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<v Speaker 2>that you should be stocking away money in advance something's

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<v Speaker 2>going to happen, and that way, you're only tapping your

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<v Speaker 2>e fund for legit emergencies that really couldn't have been

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<v Speaker 2>planned for ahead of timeAs right.

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<v Speaker 3>And I mean the goal it should be to replenish

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<v Speaker 3>it quickly after you use that emergency fund, after you

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<v Speaker 3>tap it. The truth is that two four and sixty

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<v Speaker 3>seven dollars like that is a great starting point, but ideally,

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<v Speaker 3>like you want to have something more like three to

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<v Speaker 3>six months worth of expenses on hand. My family, we

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<v Speaker 3>personally like to air on the six months end of

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<v Speaker 3>the spectrum. And where it is that you choose to

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<v Speaker 3>stash this newly prized e fund that is worth briefly

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<v Speaker 3>discussing as well. Online banks they typically offer the very

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<v Speaker 3>best rates, the best customer service and user interface as well,

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<v Speaker 3>and so with that in mind, we tend to dig

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<v Speaker 3>c discover ally there are other great online banks as well,

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<v Speaker 3>but it's just a good idea to do your banking

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<v Speaker 3>at a place that values your business and.

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<v Speaker 2>Treat you fairly. Yeah, and by the way, giving you

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<v Speaker 2>a specifical affirm number to aim for is a good thing,

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<v Speaker 2>But what if even getting to that point feels like

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<v Speaker 2>a huge lift. We would say creating a plan to

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<v Speaker 2>get there is crucial, breaking it down into smaller chunks.

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<v Speaker 2>If you think about it like that, and maybe you

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<v Speaker 2>de signed okay, I think it's going to take me

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<v Speaker 2>a year to say about that kind of money, Well,

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<v Speaker 2>you just need to find six dollars and seventy five

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<v Speaker 2>cents each day to stock away. That makes it a

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<v Speaker 2>little easier, and it might even help to create a

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<v Speaker 2>visual aid to track your progress. Matt he mentioned ally

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<v Speaker 2>as a bank worth considering, they've got a very cool

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<v Speaker 2>savings bucket feature that might be a helpful mechanism for you.

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<v Speaker 2>And another option, Acorns, is a cool app. They can

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<v Speaker 2>help you save money without even thinking about it by

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<v Speaker 2>rounding up your purchases. So we would say, pick the

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<v Speaker 2>method that makes the most sense to you in order

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<v Speaker 2>to reach that goal in the least amount of time.

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<v Speaker 1>What great advice, Well, thank you Joel and Matt. Having

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<v Speaker 1>a good emergency fund can be more doable than you think.

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<v Speaker 1>For more great financial tips, please listen to Joel and

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<v Speaker 1>Matt at the How to money podcast and in the meantime,

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<v Speaker 1>this is Laura. Thanks for listening and here's to making

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<v Speaker 1>the most of our time. Hey, everybody, I'd love to

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<v Speaker 1>hear from it. You can send me your tips, your questions,

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<v Speaker 1>or anything else. Just connect with me on Twitter, Facebook

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<v Speaker 1>and Instagram at Before Breakfast Pod. That's b the number

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<v Speaker 1>four than Breakfast pod. You can also shoot me an

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<v Speaker 1>email at Before Breakfast Podcasts at iHeartMedia dot com that

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<v Speaker 1>Before Breakfast is spilled out with all the letters. Thanks

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<v Speaker 1>so much. Should I look forward to staying in touch.

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