An emergency fund is a savings account that covers last-minute or emergency expenses. You might use it to cover car breakdown costs, medical bills or any other surprise costs that you can't put off.
However, once you have used your savings, you must quickly build them back up to protect you against future emergencies. This article examines how to recover your emergency fund and what you should do when the fund is empty. Let's get started.
An empty emergency fund can be very stressful. Without the money, you are vulnerable to surprise costs and you may have to rely on credit or loved ones to loan you money to make any last-minute payments. This isn’t only unpleasant for your finances, but it can lead to anxiety and general unease – especially if you are at risk of accruing debt.
Read more about emergency funds and their benefits.
So, if you have noticed your emergency fund is running low or completely empty, it is important to start paying back into it as soon as possible. Don’t wait until later – the present moment is always the best time to start rebuilding this essential fund.
Knowing how to quickly save money is a great life skill to have and it is particularly important when it comes to putting money aside for an emergency fund.
Here are five ways to save and combat surprise expenses with a low emergency fund.
When your fund is running low, the first step to take is to assess your finances. Look at your income, expenses and debt. Make sure your priority expenses are covered and see if any non-essential payments can be postponed, so you can allocate the money to your fund.
Consider cutting your usual costs for a few months so you can create some extra disposable income. You can then deposit this into the emergency fund.
If you receive any monetary gifts or work bonuses, you can put these straight into the emergency fund. While it is tempting to spend these, the security of building back your fund is much better for your future self!
It is not possible for everyone to take a part-time job or start a side hustle. But you can start selling pre-loved clothes or other items you no longer use on eBay to make some extra cash. Other ways to make some casual money include dog walking services, handing out flyers or tutoring.
While rebuilding the amount of money you may need for future emergencies, you should also set up strategies that help you avoid this situation in the future.
For example, whenever you make a future withdrawal from the fund, try to replenish the exact amount shortly after.
You can also budget for a portion of your monthly income to go to the emergency fund - even if it is already at your goal amount.
Lastly, if your funds are depleted and an emergency bill arrives, you can reduce stress by knowing where to access immediate financial assistance. You could ask friends or family for loans, use a credit card or opt for payday loans.
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