WEBVTT - How to create an emergency fund

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<v Speaker 1>Welcome to Before Breakfast, a production of I Heart Radio.

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<v Speaker 1>Good morning, This is Laura. Welcome to the Before Breakfast podcast.

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<v Speaker 1>Today's tip is about how to build up a small

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

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<v Speaker 1>in the bank, you can be far more calm about

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<v Speaker 1>life's problems. To help me with this tip, I invited

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<v Speaker 1>Joel and Matt from the How to Money podcast to

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<v Speaker 1>share some strategies. They're with me here now as they

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<v Speaker 1>will be for a few episodes this week. So Joel

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<v Speaker 1>and Matt please take it away. We'll do. Thanks for

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<v Speaker 1>having us, Laura. And with a potential recession on the horizon,

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<v Speaker 1>cash is most definitely not trash. Having money stocked away

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<v Speaker 1>in the same mus account is massively important for financial

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<v Speaker 1>emergencies that might come along. And if you had noticed,

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<v Speaker 1>rates for savings have been moving up in a major way, thankfully,

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<v Speaker 1>So how much should you have saved? What your initial

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<v Speaker 1>savings goal? We would say should be to have two thousand,

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<v Speaker 1>four hundred and sixty seven dollars on hand. And yes,

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<v Speaker 1>I know that is oddly specific, Yeah it is, but

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<v Speaker 1>there is actually a reason for that specificity. First, having

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<v Speaker 1>a particular and peculiar number like that, like two four

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<v Speaker 1>six seven that sticks in your brain, right, it allows

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<v Speaker 1>you to remember the goal that you're aiming for. But second,

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<v Speaker 1>research economists they found that just a couple of years back,

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<v Speaker 1>that this is a it's a magical number that allows

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<v Speaker 1>folks to pay for almost any emergency that might pop up.

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<v Speaker 1>It's sort of like a financial floor, if you want

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<v Speaker 1>to think about it that way. Now, it's not going

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<v Speaker 1>to pay for a brand new engine in your private jet.

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<v Speaker 1>It's not. I mean now you even pay for a

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<v Speaker 1>new engine in just your your regular old suv. But

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<v Speaker 1>it will provide enough financial margin to allow you to

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<v Speaker 1>weather most money storms that that can and will come along. Yeah,

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<v Speaker 1>it's also to mention that not too many things should

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<v Speaker 1>fall under the classification of emergency. Right. Holiday presents, for instance,

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<v Speaker 1>are not an emergency. You should be planning and saving

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<v Speaker 1>throughout the year for those new tires. Same thing, Right,

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<v Speaker 1>it shouldn't be shocking to you that those bald pieces

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<v Speaker 1>of rubber that you're driving on every day need to

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<v Speaker 1>be replaced and saving saving up for those over time

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<v Speaker 1>is going to alleviate any financial shock that you might experience.

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<v Speaker 1>Whole maintenance also right. You you might not not know

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<v Speaker 1>exactly what's coming down the pike, but you know it's

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<v Speaker 1>of course inevitable that you you should be stocking away

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<v Speaker 1>money in advance something's going to happen, and that way,

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<v Speaker 1>you're only tapping your e fund for legit emergencies that

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<v Speaker 1>really couldn't have been planning for ahead of times, right,

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<v Speaker 1>And I mean the goal should be to replenish it

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<v Speaker 1>quickly after you use that emergency fund, after you tap it.

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<v Speaker 1>The truth is that two thousand four or sixties seven

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<v Speaker 1>dollars like that is a great starting point, but ideally,

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<v Speaker 1>like you want to have something more like three to

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<v Speaker 1>six months worth of expenses on hand. My family, we

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<v Speaker 1>personally like to air on the six months end of

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<v Speaker 1>the spectrum. Uh And where it is that you choose

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<v Speaker 1>to stash this newly prized E fund that is worth

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<v Speaker 1>briefly discussing as well. Online banks they typically offer the

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<v Speaker 1>very best rates, the best customer service and user interface

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<v Speaker 1>as well, and so with that in mind, we tend

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<v Speaker 1>to dig C I T discover ally there are other

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<v Speaker 1>great online banks as well, but it's just a good

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<v Speaker 1>idea to do your banking at a place that values

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<v Speaker 1>your business and treat you fairly. Yeah, and by the way,

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<v Speaker 1>giving you a specifical, a firm number to aim for

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<v Speaker 1>is a good thing. But what if even getting to

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<v Speaker 1>that point feels like a huge lift. We would say

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<v Speaker 1>creating a plan to get there is crucial, breaking it

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<v Speaker 1>down into smaller chunks. If you think about it like that,

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<v Speaker 1>and maybe you you decide, okay, I think it's gonna

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<v Speaker 1>take me a year to say about that kind of money, Well,

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<v Speaker 1>you just need to find six dollars and seventy five

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<v Speaker 1>cents each day to stock away. That makes it a

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<v Speaker 1>little easier, and it might even help to create a

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<v Speaker 1>visual aid to track your progress. Matt he mentioned ally

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<v Speaker 1>as a bank worth considering, they've got a very cool

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<v Speaker 1>savings bucket picture that might be a helpful mechanism for you.

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<v Speaker 1>And another option, Acorns, is a cool app. They can

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<v Speaker 1>help you save money without even thinking about it by

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<v Speaker 1>rounding up your purchases. So we would say, pick the

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<v Speaker 1>method that makes the most sense to you in order

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<v Speaker 1>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 you. You can send me your tips, your questions,

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

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<v Speaker 1>number four, then Breakfast p o D. You can also

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<v Speaker 1>shoot me an email at Before Fast podcast at iHeartMedia

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<v Speaker 1>dot com that Before Breakfast is spelled out with all

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<v Speaker 1>the letters. Thanks so much, I look forward to staying

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<v Speaker 1>in touch. Before Breakfast is a production of I heart Radio.

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