Second Cup: How to create an emergency fund

How to create an emergency fund

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Episode Transcript

Speaker 1 (00:03):
Welcome to Before Breakfast, a production of iHeartRadio. Good Morning,
This is Laura. Welcome to the Before Breakfast podcast. Today's
tip is about how to build up a small emergency
fund quickly. When you have at least some money in

(00:23):
the bank, you can be far more calm about life's problems.
To help me with this tip, I invited Joel and
Matt from the How to Money podcast to share some strategies.
They're with me here now as they will be for
a few episodes this week. So Joel and Matt please
take it away well do.

Speaker 2 (00:44):
Thanks for having us Laura. And with a potential recession
on the horizon, cash is most definitely not trash. Having
money socked away in a save us account is massively
important for financial emergencies that might come along. And if
you had noticed, rates for savings have been moving up
in a major way, thankfully, So how much should you

(01:04):
have saved? What your initial savings goal? We would say
should be to have two thousand, four hundred and sixty
seven dollars on hand. And yes, I know that.

Speaker 3 (01:13):
Is oddly specific, Yeah it is, but there is actually
a reason for that specificity. First, having a particular and
peculiar number like that, like two four six seven, that
sticks in your brain, right, it allows you to remember
the goal that you're aiming for. But second, research economists
they've found that just a couple of years back, that
this is a magical number that allows folks to pay

(01:36):
for almost any emergency that might pop up. It's sort
of like a financial floor, if you want to think
about it that way. Now, it's not going to pay
for a brand new engine in your private jet, it's not.
It may now you even pay for a new engine
in just your your regular old suv. But it will
provide enough financial margin to allow you to weather most
money storms that that can and will come along.

Speaker 2 (01:59):
Yeah, it's also important to mention that not too many
things should fall under the classification of emergency. Right. Holiday presidents,
for instance, are not an emergency. You should be planning
and saving throughout the year for those new tires. Same thing, Right,
it shouldn't be shocking to you that those bald pieces
of rubber that you're driving on every day need to
be replaced. Saving up for those over time is going

(02:21):
to alleviate any financial shock that you might experience. Home
maintenance also, right, you might not know exactly what's coming
down the pike. But you know, it's of course inevitable
that you should be stocking away money in advance something's
going to happen, and that way, you're only tapping your
e fund for legit emergencies that really couldn't have been
planned for ahead of timeAs right.

Speaker 3 (02:40):
And I mean the goal it should be to replenish
it quickly after you use that emergency fund, after you
tap it. The truth is that two four and sixty
seven dollars like that is a great starting point, but ideally,
like you want to have something more like three to
six months worth of expenses on hand. My family, we
personally like to air on the six months end of

(03:00):
the spectrum. And where it is that you choose to
stash this newly prized e fund that is worth briefly
discussing as well. Online banks they typically offer the very
best rates, the best customer service and user interface as well,
and so with that in mind, we tend to dig
c discover ally there are other great online banks as well,

(03:23):
but it's just a good idea to do your banking
at a place that values your business and.

Speaker 2 (03:28):
Treat you fairly. Yeah, and by the way, giving you
a specifical affirm number to aim for is a good thing,
But what if even getting to that point feels like
a huge lift. We would say creating a plan to
get there is crucial, breaking it down into smaller chunks.
If you think about it like that, and maybe you
de signed okay, I think it's going to take me
a year to say about that kind of money, Well,
you just need to find six dollars and seventy five

(03:50):
cents each day to stock away. That makes it a
little easier, and it might even help to create a
visual aid to track your progress. Matt he mentioned ally
as a bank worth considering, they've got a very cool
savings bucket feature that might be a helpful mechanism for you.
And another option, Acorns, is a cool app. They can
help you save money without even thinking about it by
rounding up your purchases. So we would say, pick the

(04:11):
method that makes the most sense to you in order
to reach that goal in the least amount of time.

Speaker 1 (04:16):
What great advice, Well, thank you Joel and Matt. Having
a good emergency fund can be more doable than you think.
For more great financial tips, please listen to Joel and
Matt at the How to money podcast and in the meantime,
this is Laura. Thanks for listening and here's to making
the most of our time. Hey, everybody, I'd love to

(04:42):
hear from it. You can send me your tips, your questions,
or anything else. Just connect with me on Twitter, Facebook
and Instagram at Before Breakfast Pod. That's b the number
four than Breakfast pod. You can also shoot me an
email at Before Breakfast Podcasts at iHeartMedia dot com that

(05:03):
Before Breakfast is spilled out with all the letters. Thanks
so much. Should I look forward to staying in touch.
Before Breakfast is a production of iHeartRadio. For more podcasts
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