Credit card interest rates are at a record high. Don’t rely on credit to pay for emergencies! 

79% of Millennials are unprepared for a $1,000 crisis. In many instances, this leads to responding to emergencies with credit cards, which then leads to pay over time. However, if this behavior becomes a habit it could lead to a bad credit score, causing individuals to accumulate more debt. As alarming interest rates on loans that will take much longer to pay back. Aventa understands that it could be hard to prepare for savings in today's financial landscape. Here are five things to understand about emergency savings. 

How does having emergency savings relate to my credit score?

An emergency fund serves as a a financial "cushion" when an unexpected situation arises. It reduces the need to rely on credit cards or loans. Additionally, it can serve to safeguard your credit score by avoiding debt in times of crisis. Timely bill payments and low credit utilization are achievable with an emergency fund, which contributes positively to your credit history.

How do I find a savings account that works for me?

Choosing the correct savings account is essential. Consider your financial goals, risk tolerance, and liquidity needs. Combining a traditional savings account and higher-yield options like a money market account or certificates of deposit (CDs) can balance accessibility and growth.

How much should I save?

When deciding how much to save, aim for at least three to six months' living expenses—factor in essential costs like rent or mortgage, utilities, groceries, and insurance. 

What if I have a tight budget?

When living paycheck to paycheck, saving is still possible. Start small, if necessary, allocating a percentage of your income to your emergency fund. Look for areas where you can cut unnecessary expenses and redirect those funds toward savings. No matter how modest, every contribution brings you one step closer to financial security. Also, consider putting unexpected funds towards your savings budget, like tax returns or bonuses from work. 

When should I use my emergency funds?

An emergency fund provides peace of mind, allowing you to navigate unforeseen circumstances without incurring debt. Whether facing a medical emergency, car repair, or unexpected job loss, your emergency fund becomes a financial lifeline.

Building and maintaining an emergency fund is essential to securing your financial future. Beyond serving as a safety net for unforeseen expenses, it is pivotal in fostering a positive credit score and financial well-being. You can create a great financial foundation by incorporating disciplined savings habits into your routine. Remember, it's not about the amount you save initially but the consistency of getting in the habit. 

Resources: 

https://www.beaconjournal.com/story/news/2023/02/05/more-americans-cant-afford-emergency-expense-rely-on-credit-cards/69862537007/

https://www.bankrate.com/loans/personal-loans/will-an-emergency-loan-impact-your-credit/

https://www.bankrate.com/banking/savings/ways-to-save-money-on-a-tight-budget/