Building Your Emergency Fund

A recent survey of U.S. workers by CareerBuilder found that a whopping 78% are living paycheck to paycheck.

Similarly, another recent survey by Bankrate found that 60% of Americans would NOT be able to cover an unexpected $1,000 expense.

This means that most Americans don’t have enough in savings to cover an unexpected event like a trip to the dentist because of a tooth ache, a new cell phone when they drop theirs and it shatters, new tires on their car or any car repair bill, an extended illness, or worst of all–getting fired from work.

Unexpected events like this are exactly that—unexpected—but they do eventually happen to everyone.

Your first step to financial success will be to build up your emergency fund. Do this by transferring money to your Savings Account regularly – your goal will be to save up $1,000 to cover any major unexpected expenses.

Once you hit your $1,000 goal, a well-funded Emergency Fund should be able to cover 6 months of your expenses. Normally this would be built up over a few years of savings, so this probably won’t be feasible during your time in the game.

Financial guru Suze Orman says to reach your Emergency Fund goal, here are some popular tricks:

  1. Stick to a plan and save a little more than what feels easy – a good target should be at least 10% of your earnings.
  2. Set up automatic deposits right out of your paycheck, or make transfers as soon as you get paid.
  3. Make sure your savings account earns interest – in the budget game, you earn a 3% annual interest rate on your savings account.
  4. Name the account something personal like “MySavingsStash” to help motivate you.
Budget Game Tip: For the purposes of this budgeting game, you will earn bonus points when your Savings Account balance hits $500, then even more points when you save up $1000. But you will lose these bonuses if you transfer money out below the threshold, so keep it saved!

Now that you know a bit more about building up an Emergency Fund, close this window to continue the game!