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It’s ironic. People don’t think about emergency funds until they need one. And then it's usually too late.

It’s only human nature to wall off the possibility of bad news. So preparing for the financial consequences of a layoff or an illness, especially in these tough times, isn’t always a priority.

In fact, it’s usually not a priority. A 2009 MetLife study says that half of all Americans are only two paychecks away from having serious financial problems.

Thus, according to the MetLife study: “Without a steady paycheck, 50% of Americans say they could not meet their financial obligations for more than a month - and, of that, a disturbing 28% couldn't support themselves for more than two weeks of unemployment."

The takeaway? Don’t let this happen to you. Here are some key steps to take to start – and to maximize – your emergency savings fund.
Let’s get a few caveats out of the way first. The following tips assume you have a savings account and that you have a good idea of how much money you need to stash on a regular basis. To get going on that front, use the BankingMyWay Emergency Savings Calculator.

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With those building blocks in place, try the following tips to build your cash reserve:

Think of Savings as Insurance. A good savings plan is all about mitigating risk, much like an insurance policy does. So treat your cash reserve that way. Keep your emergency funds in a safe place with guaranteed returns, like a bank certificate of deposit or a good bank savings account. Then pick a “premium” payment each month (aim for 5% of your paycheck to start – you’ll be amazed at how little you notice, especially if you cut household spending). Check with BankingMyWay’s Compare Savings Rate calculator to figure out how much you can save, and how much interest you can expect to get.

Keep It Real. One of the most common reasons that emergency fund campaigns fail is that savers pull the money out for reasons that legitimately don’t meet the definition of “emergency”. Not having enough money to cover your Redskin’s season tickets isn’t an emergency. Not having enough money to keep your lights and heat on this winter is an emergency. To beat the odds, make a list of emergencies (and make it a small one) where you are allowed to pull money out of your emergency account. Normally, healthcare, food, and utilities are at the top of such a list.

Don’t spend a windfall. It happens all the time. A beloved family member dies and leaves you a $10,000 inheritance. Or you earn a $5,000 year-end bonus at work. The urge to splurge in those cases is a strong one, especially when you eyeball all those zeros on the bank check you receive. But fight the impulse. Taking some of that money for investment purposes, or to pay down debt, is understandable. Just make sure you use some to beef up your emergency savings fund, too.

Some other quick tips: sign up for direct deposit – it’s a direct path to your emergency account. Or, start a “coin jar” campaign, where you toss your pocket change every day into a big can or jar and then deposit it all into your savings account at the end of every month. Also, try a “cash back” rewards credit card and stick the proceeds directly into your bank account.

Plain and simple, emergency savings is all about discipline.  But, as they say, no pain, no gain.