
In Focus – SCCCU Blog
Stay informed about the Credit Union’s activities, plus get practical advice on a variety of personal finance topics.

Building an Emergency Fund While Paying Off Debt
Unfortunately, emergencies don’t announce their pending arrival months in advance. They pop up unexpectedly and trigger a mad scramble for cash to cover whatever catastrophe fate may have in store. Thankfully, having an emergency fund is like having a mini-insurance policy — it can ensure you don’t take on debt when something inevitably happens.
How Much Do I Need?
The standard emergency fund savings guideline is to have enough money to cover three to six months of essential living expenses. However, more recent research shows that a six-month cash cushion may not be necessary. In fact, six weeks of living expenses may be plenty. If six weeks’ worth of savings seems impossible, set a manageable weekly savings goal — $10, $20, $50, or whatever amount you can afford — and get the ball rolling. When you’ve amassed several hundred dollars, set your sights on a larger goal, such as $2,000.
How Long Will It Take to Build an Emergency Fund While Paying Off Debt?
If you’ve been putting $500 per month toward your debt, you can start building your emergency fund by directing a portion of that — say, $100 — toward savings while continuing to put $400 toward your debt. This will allow you to gradually build your savings while making a meaningful dent in your debt.
If your goal is building a $2,000 emergency fund, setting aside $100 per month will get you there in 20 months. Or, you could start with a more aggressive 50/50 split, putting $250 toward savings and $250 toward debt for a few months until you’ve reached a $1,000 emergency fund. Then, you can shift more funds toward debt repayment while adding smaller amounts to your emergency stash.
There is no “right” way to build your cash stash, but remember that the kind of debt you have matters — credit cards can carry rates of 25%, while student loans may only cost you 6%. The higher the interest rate on your debt, the more money you may want to funnel toward paying down your debt. (With that said, even when you’re faced with high-interest debt, it’s still wise to set aside at least $500 to $1,000 for emergencies so you won’t dig deeper into debt should something happen.)
Hacks to Save More in Your Emergency Fund
Automating your savings is one of the best ways to get yourself to save — when you’re setting aside money before you ever have the chance to spend it, it’s truly out of sight, out of mind. So, set an automatic transfer from your checking account into your savings account every month (or every pay period, depending on your preference).
If you stumble upon unexpected money, such as a tax refund, resist spending it all. Split it in half, and channel a portion of it into savings and a portion into debt reduction.
If your budget has zero room for savings, consider a side gig or acknowledge that it may be time to change jobs to increase your earning power.
Where to Put Your Emergency Fund Funds
The best place for your emergency savings is somewhere safe (low-risk and NCUA-insured) and accessible, where it will earn the highest possible interest rate. High-yield savings accounts and money market accounts are generally the best places to keep emergency funds. Savings accounts offer simplicity, safety, accessibility, and decent interest rates. Meanwhile, money market accounts typically pay higher rates (when compared with savings accounts) but often have higher minimum deposit requirements or more limited access. Check out our latest rates here.
You Got This!
Don’t expect to have thousands saved overnight. Save as much as possible, as often as possible, and you’ll eventually get there. In the same way, you can successfully chip away at your debt by making consistent on-time payments, you can successfully build up your emergency fund by making regular contributions. Slow and steady always wins the race!
- CATEGORIES: Financial Education

Essential Documents for Estate Planning

I May Have Been Scammed. What Can I Do?
