“I’m in my late 20s and finally starting to get serious about my finances”: I have little saved up and debt to pay off. How can I start an emergency savings fund?

Hey Money Minder,

So, I’m in my late 20s and I’m really trying to step up my finance game. Everyone keeps talking about this emergency savings fund, but I honestly have no clue where to even begin.

Right now, I’ve only got a few hundred bucks in my checking account, and I’ve got some debt hanging over my head (thanks student loans and credit cards). I’m trying to tackle that, but I know I should also have some cash stashed away for the unexpected stuff.

If you’ve managed to build up an emergency fund, how did you do it? Should I prioritize paying off debt or start saving right away, even if it’s just a little bit? How much should I even be aiming to save, and where’s the best spot to keep that money safe? Any tricks or tips that have helped you out?

I’d really love to hear any advice or stories you’ve got. Thanks a bunch in advance!

Later,
Money Saver Extraordinaire

Response from THE MONEY MINDER:

Hello There,

Congratulations on taking the first step towards financial responsibility by recognizing the importance of building an emergency savings fund. It’s completely understandable to feel overwhelmed at the beginning, but with a practical approach, you can work towards your goal.

Given your current situation with some debt to tackle, it would be wise to address both saving and paying off debt simultaneously. Start by creating a budget to track your income and expenses, allowing you to identify areas where you can cut back to allocate funds towards both goals. Perhaps setting aside a small percentage of your income towards savings while prioritizing paying off high-interest debt could be a balanced approach.

In terms of the amount to save, the general recommendation is to aim for at least three to six months’ worth of living expenses in your emergency fund. This safety net will cushion you in case of any unexpected financial setbacks, offering peace of mind and financial security.

As for where to keep your savings, consider opening a high-yield savings account separate from your regular checking account. This option will provide you with easy access to your funds in emergencies while also earning higher interest rates than traditional savings accounts.

Remember, the key to successfully building an emergency fund is consistency and discipline. Set realistic goals, stick to your budget, and celebrate small victories along the way. With determination and a clear plan in place, you’ll soon see your emergency savings fund grow.

Best of luck on your financial journey, and remember that every step forward counts!

Farewell from THE MONEY MINDER