It takes a lot of time, effort, and sacrifice to build a healthy emergency fund. Seeing so much money in your bank account can be tempting, especially when you’re constantly bombarded with advertisements for electronics, events, and trips. If you want to your money to be in your account when there’s actually an emergency, you have to avoid dipping into your emergency fund.
Reduce your spending to within your income.
Living within your means prevents the need to dip into your savings. You won’t have to move money from your savings account to prevent an overdraft. Plus, when you cut your expenses, you can afford to save more.
Make it harder to access your account.
The harder it is to get to your savings, the less likely it is that you’ll go into unless it’s an emergency. For example, consider opening a savings account at a different bank from your primary checking account. Don’t link the accounts and don’t get an ATM or debit card for the savings account. Make it so that you actually have to go into a bank branch to withdraw money.
Think of withdrawals as loans.
Treat your emergency fund like a 401(k). You can only take a withdrawal under certain circumstances and any withdrawals have to be repaid in a specific timeframe. With 401(k) withdrawals, you face tax penalties for early withdrawals. The penalty for withdrawing money from an emergency fund is not having the funds available when you’re facing an emergency. In some ways that can be worse.
Set up multiple savings accounts.
You can have a “no touch” savings account, where you hold your rainy day fund, and another savings account that you use to save up for vacations and other large purchases. Contribute to both savings accounts each month, so they’ll continue to grow. Then, when you want to withdraw money for a large purchase, use the account that’s designated for purchases and leave the other one untouched.
Practice self-control.
Tricking yourself into not touching your savings can only work for so long. Ultimately, it’s up to you to develop the willpower necessary to avoid using your emergency fund. Remember what the fund is for – emergencies – and don’t allow yourself to use it for anything else.