Start With an Emergency Fund
Whether it's an unexpected medical bill, a problem with your car or a busted computer, emergencies happen to everyone and they usually come with a pretty steep cost. But according to Bankrate's latest financial security index survey, only 39 percent of Americans said they'd be able to cover a $1,000 setback using their savings. In a time when so many of us are living without an adequate safety net, they key is to start prioritizing savings by starting small.
Try putting $50 a month or 5 percent of each paycheck (whichever is easier) into an online savings account until you've saved a nest egg of one month's expenses. Then shoot for three months' salary. That gives you some freedom to change jobs or take some risks. Online banks offer higher interest rates than standard banks—for example, $3,000 in your account could earn $150 in interest over five years versus the paltry two bucks you'd get in a typical account. “Build your savings cushion by having a regular direct deposit into a dedicated savings account,” says Bankrate's chief financial analyst Greg McBride. “Even when unplanned expenses arise, you're only one paycheck away from beginning to replenish that savings cushion.”