When you are a gig worker, you need to have “emergency” savings in addition to your regular savings. You can keep the money in one account – just keep in mind that whatever amount you choose as your emergency savings is the amount that you need to keep in that account. So, if that number is $10,000 and you have $15,000 in savings, you should be telling yourself that you have just $5,000 in savings.
How Much You Should Keep in Your Savings Account for Emergencies
Different financial professionals have different views on this. The best way is to add up all of your bills. Then, add the minimum you spend on food, gas, and other necessities to that number. Multiply that amount by the number of months you need to put aside. In most cases, people need about six months’ worth of savings. But, self-employed workers could bring this amount up to 12 months, especially in times where the economy is volatile.
When you’re building your savings, you should also be aware of the outstanding debt you have. For example, financial writer Dave Ramsey says that if you have $8,000 in savings, but you have $4,000 in credit card debt, that you really have $4,000 in savings. It’s important to be mindful of the debt you have accumulated. Those funds are already spent and until the debt is paid, it will still hang over you.
How to Pick the Best Savings Account
You have a few options when considering what savings account you want to use. You can use your bank’s savings account, but you won’t get much interest on it. Look into accounts that offer higher interest rates. These are usually online accounts. Be sure to choose a bank that is FDIC insured. The money is a little harder to get to, but is still liquid. Not only will you be more likely to leave the money in that account, but it takes a couple of days to transfer the money out of that account and into your regular checking account.
How to Make Sure You’re Building Your Emergency Savings
Many people believe that they don’t have enough to put into a separate account. The trick here is to put a small amount in your savings every week. You can use an automatic transfer to achieve this so you won’t have to remember to do it. The key is to think of these transfers as an investment: you’re putting this money aside so you’re covered if anything unexpected happens.
After a few weeks, you’ll get used to the money not being available and won’t miss it. Ten dollars per week is only $40 per month. You might change how you shop or get rid of extra cable channels to make that up. As you get used to having a little less available funds, you can increase the amount.
Also, as you pay off debt, create an automatic deposit for that debt payment. For example, if you pay off a credit card with a minimum payment of $50 per month, create an automatic transfer of $50 on the same date you would have paid that payment.
Before you know it, you’ll have an emergency savings fund built, so that if you end up out of work for a couple of months, your bills will be paid and you’ll have food on the table.
About the Author: Cheryl Bowman has been writing on various topics since 2007. While she writes on many topics, including pets and food, her specialties are legal and automotive as she worked in both industries. Cheryl’s legal specialties are bankruptcy and family law, but she writes about criminal law and civil cases such as personal injury and real estate. You can find Cheryl on Writer Access.