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When your glass is half full, a depleted emergency fund is a sign these critical savings have done their job. It gave you the means to handle an unexpected expense without disrupting the rest of your budget.
But for those pessimists who see the glass half empty, $0 in an emergency fund means it can’t be your safety net in another emergency.
Both perspectives are correct, which only highlights the need to rebuild your savings. This way, you’ll be prepared when the next time disaster strikes.
1. Use Your Budget to Fast-Track Savings
If your emergency fund is empty (or near to it), you’ll want to make sure your first several contributions are larger than normal. Increasing your typical savings can help jump-start your fund, so it grows faster than usual.
Look to your budget to spot unnecessary expenses you can hit “pause” on until you get at least $1,000 in your fund. You can add these fun expenses back to your budget once you feel like your fund is better prepared for the unexpected.
2. Use Your Line of Credit in Emergencies
In a perfect world, you won’t deal with an unexpected expense until after you rebuild your emergency fund. In reality, an emergency usually arrives when you’re least prepared.
A line of credit can be helpful in situations when you’re stuck handling an emergency expense without an emergency fund. It’s a safety net, letting you tap into extra funds in extenuating circumstances.
If you don’t already have a line of credit in your financial toolkit, go online to find out more. The line of credit experts at Fora Credit make it easy to research your potential options in an emergency. Once you have one, you can withdraw cash against your available credit as you need it, whenever you need it.
3. Move Your Emergency Fund to a High-Yield Savings Account
In Canada, the typical savings account might earn 2.5% in interest, but there’s a chance you’re earning as little as 1%. In a year, a balance of $5,000 would earn a measly $50.
At this rate, a basic savings account isn’t doing you any favours. You might as well be saving your money underneath your mattress for all that it’s earning in interest.
You can maximize your earnings by switching to a high-yield savings account. Some accounts offer nearly 5%, earning 50 times what you normally get with a basic account. That translates into more than $200 per year on a $5,000 balance — and more if you blow past these benchmarks!
4. Automate Your Contributions
Building a savings account is easier when you’re consistent. Monthly — or better yet, bi-weekly — contributions add up faster than if you save whenever you manage to remember.
You can automate your contributions just like any other bill online. Just make sure you set a recurring transfer from your chequing account that fits with your budget.
5. Fold in Windfalls
With tax season on its way, the government might be cutting you a cheque in the near future. While you can use this splurge on something fun, a refund is a quick and painless way to replenish your emergency fund. The same goes for any unexpected financial gain.
Admittedly, rebuilding an emergency fund isn’t easy these days, but it is possible when you follow these five tips.
