Making the shift from renting to owning can be an exciting way to build long-term wealth, but it also carries certain financial burdens. In addition to a mortgage, rates, taxes and insurance, homeowners also need to set aside money for repairs and maintenance. These ongoing expenses are simply part of homeownership. But if your home’s purchase price leaves you with nothing in the bank, you’ll be in trouble if an emergency occurs during your first months of ownership.
Avoid this issue by keeping an emergency fund (also known as a rainy-day fund or savings buffer), an amount of money you set aside to help cover the cost of any urgent and unexpected expenses. Having a savings buffer means you won’t need to borrow money if a crisis happens and you need money quickly, says SmartMoney. Saving regularly is the best way to build up your savings balance. Set up a separate high interest savings account for your savings to go into via automated payments set up with your bank. You can also ask your payroll department if they can send part of your pay to your savings account. Then you can set and forget, knowing that your savings are growing without you having to transfer them every time you get paid.