Every Student Should Start an Emergency Fund this Summer: Here’s Why
Whether you or your teen is starting at a postsecondary institution in the next few months, creating the foundations of an emergency fund before the semester has even begun is an excellent way to bolster financial literacy. It’s also a fantastic safety net in case of unexpected costs during the school year.
There’s a persistent, romanticized vision of stretched finances during our time at college or university— it’s almost expected that students will embrace shoe-string budgets and cheap and cheerful meals. Ramen, anyone?
But being prepared for emergencies will alleviate stress, empower students to breeze forward should the unforeseen arise, and provide a good foundation for greater responsibilities later in life.
It’s all too easy to assume that emergencies during the school year will be inconsequential or unlikely. Actually, the potential for an emergency-type situation is ever-present and may include a broken laptop — a devastating blow for any student — or an unexpected vehicle repair.
Various types of installment loans online can get students out of these kinds of common emergency binds. Lenders can provide an unsecured, short-term installation loan, meaning borrowers do not need to provide collateral to qualify (though the interest rates may be higher). This is a savvy option, but being prepared for the worst, and planning ahead, can undoubtedly see students in better financial standing.
Here are a few tips for starting an emergency fund before classes are in session.
Create a Goal
If you’re fortunate enough to receive a monthly income from your parents, or if you’ve taken on a part-time job to see you through your studies, take some time to establish a realistic monthly savings goal.
Even if you start with a small amount, getting started is what’s most important. You can always upgrade or reduce the amount at a later date.
Choose the Right Savings Account
Ultimately, the correct savings account will vary based on your location and personal circumstances. Generally speaking, you’ll want an account that allows you to access your funds easily and quickly and where you won’t be penalized for doing so.
High-Yield Savings Accounts and Tax-Free Savings Accounts are worth consideration, and may offer a safe place for your money to grow.
Identify what you’d like to attain from your account, do your research, and connect with the financial institutions you think can help.
Opt for Automation
Automatic contribution is a must. Here, an allocated weekly or monthly amount will be automatically moved into your savings account with each deposit. Streamlining this process will mean that you won’t miss the money, you won’t factor it into weekly expenditures, and — most importantly — it will save you from forgetting to make that all-important deposit.
An Emergency Fund Can Foster Good Habits
It’s never too early to create good financial habits. Starting and contributing to an emergency fund — even when income may be low — can help students foster healthy spending and savings moving forward. Taking a foray into banking beyond the basic chequing account can help young adults gain a deeper understanding of finances, budgeting, and just how effective saving can be.
The Bottom Line
By starting an emergency fund at the beginning of the school year, researching the most appropriate savings account, and putting money aside semi-frequently, students can ease the stress should an emergency pop up or when money is tight.