With a stout emergency fund, you’ll be ready for anything.
- To increase your emergency fund, try savings challenges that make saving money fun.
- If you get a tax refund, put most or all of it in your emergency savings.
- Cash back credit cards and coupon apps help you save more on your regular expenses.
If you’re concerned about a possible recession, you’re not alone. Inflation, a volatile stock market, and high-profile bank collapses have many people worried that one could be on the way. A recession normally involves widespread layoffs, and it’s always scary to think you may lose your job.
The best way to be prepared for a recession is to have enough money in your emergency fund. Experts have traditionally recommended saving enough money to cover at least three to six months of living expenses. Some go even further and recommend saving a year’s worth.
Saving enough will give you more peace of mind, as you know you’ll have money to pay your bills in the event of a job loss. If you want to boost your emergency fund and feel more secure in your finances, here are some easy ways to do it.
1. Do a savings challenge
If you have a hard time saving as much as you’d like, gamifying it is a great solution. Savings challenges have been getting more popular, and there are lots of fun options, including:
- A no-spend challenge: Only spend on necessities, and nothing else, for a set time period. A week is a good starting point, and if you like it, you can go for a full month.
- Eliminate an expense: Pick one of your discretionary expenses and get rid of it for a month. Dining out is a popular choice for this challenge, but anything that isn’t a necessity works. For example, you could cut streaming services and use free alternatives.
- Pantry challenge: Use everything you have at home before buying more groceries. You’ll save some money and reduce food waste.
2. Put your tax refund in your emergency savings
Not everyone gets a tax refund, but for those who do, it’s often one of the biggest financial boosts of the year. In 2022, the average tax refund was $3,039. If you get a tax refund and don’t have any other pressing needs, consider putting all or most of it in your emergency fund. You could have another month’s worth of living expenses from that alone.
3. Get a cash back credit card
A cash back card is one of the simplest ways to earn extra money, without much effort required on your part. Some of the best cash back credit cards earn 3% to 6% back in bonus categories, such as groceries and gas. There are also cards that earn a flat rate of 2% back on purchases, regardless of the spending category.
In addition, many cash back cards offer sign-up bonuses for new cardholders. For example, a card may offer a $200 bonus if you spend at least $500 in the first three months. If you’re going to spend that much anyway, a sign-up bonus is the closest thing to free money. You can deposit the cash back you earn in your bank account to increase your emergency fund.
4. Use a coupon app
Everyone likes the idea of saving money on their regular expenses, but not everyone likes clipping coupons. Fortunately, you don’t have to. With coupon apps, you can browse offers and save the ones you like on your phone. Depending on the app, you may be able to use coupons in stores, online, or both.
5. Open a new bank account
At first, a new bank account might not seem like something that’s going to help increase your emergency savings. But there are a couple of ways it can do just that:
- A higher interest rate: While the average savings APY is currently 0.37%, many high-yield savings accounts offer 4% or more. That means if you have $10,000 in your emergency fund, an account with an average APY would earn you $37 per year, compared to $400 or more in a high-yield account.
- A bonus opportunity: Some banks have bonuses available for new clients that complete the requirements, such as meeting a deposit minimum. These bank account bonuses can be worth hundreds to thousands of dollars.
It’s important to have a strong emergency fund, especially during economic downturns. All of the tips above are easy to implement and can make a big difference in how much you have saved.
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