Aside from normal everyday savings, it’s a good idea to have an emergency fund for unexpected events. Emergencies such as car repairs, medical expenses, or sudden job loss can cause financial turmoil or stress if you don’t have money set aside.
With inflation on the rise, the cost of products and services has soared. As such, your emergency fund should increase to accommodate the rising costs. However, without a significant income increase, meeting everyday financial demands can be difficult, and the idea of having “extra” money to put aside for emergencies every month can seem tough.
If you’re worried about your emergency fund – don’t fret. Slavic401k has tips that will make a big difference in inflation-proofing your emergency savings funds. Keep reading to learn how.
Budget, Budget, Budget
As always, the first step in prepping finances for any sort of change is to review and adjust a budget. As inflation continues to increase, it’s important that you reflect the increase in the prices you’re paying for everyday items in your budget. A $20 weekly coffee budget a few months ago could take you a lot farther than it can today, so make sure you’re adjusting appropriately.
When you review your budget, you can find the areas you may be overspending and under saving, so make changes as needed. Ask yourself:
- Can I reduce the number of streaming services I’m subscribed to?
- Am I overspending on wants and desires?
- Can I cancel a trip, pause my search for a new car, or get a side gig?
- Where can I reduce my spending and increase my savings?
Answering some of these questions will help you determine where you can find extra cash to contribute to an emergency fund, which will help fight inflation for your emergency spending.
Invest in Long-Term Solutions
To help cushion inflation, you should meet with a financial advisor who can help you analyze and adjust your portfolio. According to Forbes, investing in long-term options like stocks, bonds, and equity funds can produce effective returns on initial investments.
Though long-term strategies often post a higher risk financially, an advisor can help you move your money and invest in options that amplify reward and reduce overall risk, providing another form of emergency savings for the future.
Furthermore, you may want to consider investing in real estate – both commercial and residential – to store your money in physical, equitable solutions. By purchasing a property and renting it out, you can pay down the mortgage with the rent you receive from tenants and make extra cash on the side. The extra funds earned from your properties can be stored for a rainy day.
You may also want to consider looking into mutual funds and exchange traded funds (EFTs) because they offer solid returns that are more than the inflation rate, allowing you to make more money over time. Though this strategy is riskier than others, a financial advisor can help you strategize your investments appropriately.
Move Savings to a High Yield Account
Finally, you should look into high yield checking and savings accounts as a way to battle inflation. Financial institutions, like banks and credit unions, offer high yield savings accounts, which pay users a percentage of the funds in the account. Because financial institutions operate on tiers, make sure you shop around for the best rate before depositing your money in one place.
Many financial institutions have tiered savings rates, and companies like Nerdwallet and Bank Rate often rank them. Make sure to research the best rates and shop around before putting your money in one place.
Having an emergency fund in these types of accounts can help you earn more money for the future without doing much at all. With so many options available, it’s important to caution that some high-interest accounts come with strings attached – including regular debit card usage, or a specific spending amount each month, while others may offer no monthly fee, or cash back for spending. Make sure you do your research and find a solution that best fits your needs and budget.
Invest in a Certificate of Deposit (CD)
Certificates of Deposit (CD) is a type of savings account that holds a fixed amount of cash for a predetermined amount of time. Most commonly, CDs come in terms of six months, one year, or five years.
When you invest in a CD, you earn interest on your investment over the set period of time and can redeem your certificate, along with its earnings, at the end. This is a great way to make extra money if you’re okay with it being tied up for a few months or years.
With inflation on the rise, not all financial institutions are offering solid interest rates on CDs right now, so make sure you shop around before dumping your money in an account that won’t benefit you in the long run.
Inflation can be scary, but with the right strategies in place, you can continue to save for future, unexpected emergencies without worrying about financial ruin. To learn how to best make, save, and spend money, visit the Slavic401k blog.