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Short term savings are very important for life’s little hiccups, such as repairs to your home or medical bills for an unexpected illness, but many people are unprepared for these minor emergencies because they do not have any savings in the bank to use for these issues.  Unexpected expenses are a major cause of people falling into debt that they cannot get themselves out of or credit card bills that continue to mount each month because of the steep interest rates charged to the purchases made with the credit card.  With six simple steps and a little bit of time, you can remedy your situation and begin to build up your short term savings account.

1.  Add Up Your Monthly Expenses
Before beginning a savings program, you must first calculate how much you are spending each month on all of your normal expenses.  This should include both large expenses, such as your monthly mortgage or rent payment, and small everyday expenses, such as paying for gas to get back and forth to work.  It is important to be honest about the amount you are spending for each item in order for the calculation to be accurate.

2.  Multiply This Number By 6 
Multiplying the number reached in the previous calculation by six will give you the total amount of money needed to maintain your current lifestyle for six months.  This is the recommended amount of savings that every person should have in the bank according to many financial experts.

3.  Add Additional Funds For Unexpected Surprises And Upcoming Expenses
It is always a good idea to pad your short term savings account with a little extra just in case you’ve forgotten anything in your previous calculations.  If you know that your child will be needing braces in the next few years or that you will need to replace the water heater in your home, add the cost of these items into your short term savings calculation as well to ensure that the money will be available when it is needed.

4.  Comparison Shop For A Place To Stash Your Cash
Different banks and different banking products will often offer different interest rates for placing your money into a specific type of account.  Because your short term savings will (hopefully) remain in this account for a significant period of time, it is important to get the best return on the money being held in the account.  Shopping around for the best interest rate will help your money grow more quickly and give you an even larger cushion for unexpected life events.

5.  Begin Making Payments Into Your Short Term Savings Account
Once you have determined how much you will need to save and where the best place to put your money will be, it is time to begin an aggressive savings plan to reach your calculated savings goal.  Paying into your short term savings account should be treated like paying a monthly bill and money should go into the savings account before you begin spending money on entertainment or unnecessary luxury items.

6.  Don’t Touch The Account
The most important part of starting a savings account is actually saving it.  After your savings goal has been reached, your short term savings account should remain untouched unless there is an actual emergency, such as the loss of a job, an illness that prevents you from working, or emergency repairs that need to be completed quickly.  After all, that is what the money has been saved for.