Steps to establish an emergency fund
What would happen if life handed you a few surprises? What if you had an unexpected hospital bill, a job loss or your car isn’t working? An emergency fund can help prepare you for life’s twists and turns.
Why should you have an emergency fund?
An emergency fund can help give you peace of mind and control over your finances if you were faced with the unexpected. What if your refrigerator broke, or you had an unexpected medical expense? An emergency fund can help you handle those surprises without compromising your finances.
Steps to create an emergency fund
Ultimately, you’ll want to have three to six months’ worth of living expenses set aside in your emergency fund. But starting with a smaller goal like $500 dollars can help you avoid unnecessary debt or dipping into your retirement savings.
Saving even just $10 a week consistently can add up over a longer time period. You’ll also benefit from compounding interest, meaning any earnings on your savings stays in your account and can generate its own earnings over time.
| $10/week | $25/week | |
|---|---|---|
| 1 year | $520 | $1,300 |
| 5 years | $2,600 | $6,500 |
| 10 years | $5,200 | $13,000 |
Log in to your Voya retirement online experience. Once there, connect all of your outside account so you can see your full financial picture. You can then create your budget, and make adjustments, as needed. Access insights to your spending and see where you can reduce spending to add to your emergency savings. Then, look for ways to save even more towards your emergency fund.
Health care costs are on the rise. Health Saving Accounts HSAs are specialized accounts that pair with High Deductible Health Plans (HDHPs) where users can contribute, grow and withdraw pre-tax and tax-free dollars for eligible health-related costs. There are no limits around age, income level or the amount you can have in your account. Note that you will be unable to contribute once you are enrolled in Medicare (typically age 65).
Tips for savers:
- Don’t leave an extra dollar behind. It’s common for employers to offer additional money to their employees’ HSAs, either through contribution matching or wellness activity participation. Don’t miss these opportunities for extra funds.
- Adopt emergency fund goals. One standard goal amount for emergency funds is three to six months of expenses. Similarly, you could set a goal to have two years of your HDHP’s annual deductible saved in your HSA.
- Consider saving more each year. The IRS updates limits each year, and typically, they increase the amount HSA owners can contribute to their HSA. By making incremental increases to your contributions, you can potentially build your fund faster without diminishing your take-home pay.
- Start with a goal of saving $1,000 and increase that target to three to six months of income.
- Set up automatic deposits into your savings account.
- If your bank allows, create separate accounts to save for different goals.
- Be sure you can access your account, if needed.
- Consider opening a Health Savings Account (HSA) if you have a High Deductible Health Plan (HDHP). It can help you save for future healthcare expenses.
- Check out our Be Ready series to learn more about how supplemental health insurance can help when the unexpected happens and may pay out benefits so you don't have to dip into your emergency fund.
- Start small and gradually increase your savings over time. Starting small can add up.
Log in to your online retirement account where you can:
- Add outside accounts.
- Get a full financial picture.
- Create your budget.
- Access insights to see where you can reduce your spending.
- Participate in the emergency savings life event, where you set up your goals and create a plan to get there.
This information is provided by Voya for your education only. Neither Voya nor its representatives offer tax or legal advice. Please consult your tax or legal advisor before making a tax-related investment/insurance decision.
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