Couple Money

The Couple Money Guide to Starting Your Emergency Fund

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There are plenty of Americans who don't have any savings (one estimate puts it around 26%).

That's a scary situation to be in, even with dual income.

What if you get laid off from your job (or if they reduce your pay/hours)? What if someone gets injured? A car repair can sometimes be a big wallop too.

If you two don't have an emergency fund and you want to get started, here's a step by step guide on how to build an emergency fund that fits your family.

Two heads are better than one and couples have the ability to pool their resources to achieve goals quicker.

To illustrate the process, I'll be using a fictional couple, Hal and Maddy throughout this post.

While they may not mirror you exactly, I hope their example can get you motivated to save.

How Big Should Your Emergency Fund Be?

Before getting into whether you need three to six months stashed away in savings, let's talk about the purpose of emergency fund and getting a starter one off the ground.

First off, there is virtually no way to predict every bump in the road of life, but the two of you can brainstorm some possible scenarios over a cup of coffee. An emergency fund is about covering for an unexpected event that could happen given your circumstances.

It doesn't have to be an epic discussion, you two are looking for one or things you think will ruin your budget.

Our couple, Hal and Maddy, are tired of having hiccups set them back on their debt payment plans.

Based on some car problems they've been having, the two decide that they want to have $1,500 in the bank.

Right now they are paying an extra $100/month on their credit cards, but that will be used for the starter emergency fund instead.

Starting Point: $100/month -> 15 months to getting starter fund up

Looking at the timeline, the two want to get savings ready much quicker than that so they decide to look at their budget and trim some expenses.

Running The Numbers Together

You have to go beyond just sharing information when trying to change behavior, especially when it comes to money.

If you prefer, you can use a free tool such as Mint to pull that data so you can have an objective look at how much money is currently coming in and where it's going.

While it can be tempting to harp on bad spending habits, most couples find it counterproductive. The goal is to identify where you two can cut back, not put each other on the defensive.

Starting and Building Your Emergency Fund

With a goal in mind and some money ready to be deposited, the next issue is finding the best spot to keep your emergency fund.

Keep in mind the purpose of it, you two will need to focus on 3 things:

For us, we chose Capital One 360 as it offered us the security and access we need along with a competitive interest rate. (If you want to open a savings account with Capital One 360, simply click here to get started.)

If you prefer a brick and mortar option, try your local or regional credit unions and banks.

They may offer the service you deserve and some offer great rates for your savings.

‘finding' Money for Your Emergency Fund

It basically comes down to either cutting your expenses or earning some income.

If you're looking for a detailed list of ideas for both, I highly recommend you go through my 50/50 Challenge, where we spent a month sharing tips on building a buffer in your budget for your goals.

Spend Less

Some of  these changes are one time, some of these may be done for a limited time (perhaps one month), or you two may discover than you like the change so much you keep it.

It doesn't matter, the goal is to find different ways to trim back your spending so you can have a start fund ready as soon as possible. Where you go from there is up to you.

Earn More

While some couples find cutting expenses a breeze, other couples may already be living tight and need a boost in income.

Here are a couple of ways you can add some money into your emergency fund.

Gamify Your Savings

Each couple will come up with a list that works for their situation. If you're stumped on where to begin, go back to your expense review and pick one or two expenses that you know you can cut back on.

For our couple Hal and Maddy,  we'll pick:

These two changes will bring their starter fund contributions to $422/month which means they will have their starter fun up and ready in just over three months. Any additional changes they make will only speed it up further.

Keep Plowing Into Savings or Pay Down Debt?

The two of you can then decide which would be a better course of action – using your monthly contributions to pay down all your high interest debt before you fully stock your emergency fund or set aside a bit of money to slowly grow your stash.

If you're think of tackling both goals, yo may want to check out the 75/25 method.

Basically 75% of your contributions go toward debt reduction and 25% is used to beef up your emergency funds.

This method can be a good fit for your family if you're concerned that a starter fund won't be enough to keep you feeling secure as you pay down your debts.

Speaking of a stocked emergency fund, when coming up with that amount, you two should consider a few things to make it fit your family's particular needs:

As you can see, couples in similar circumstances can have completely different numbers, so don't get too stressed over what is the ‘right' amount.

Thoughts on Building Your Emergency Fund

I hope you enjoyed this post and have some new ideas on how to get an emergency fund started for your family.

For those who have made this milestone already, I'd love to get your take – how much savings works for the both of you? How did you ‘find' the money?

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