Do’s and don’ts of saving money when trying to navigate a crisis

Probably the last thing you want to think about during a crisis is working on healthy financial habits. But if you’re able to save, you can make your eventual recovery easier.

“Every time you put some (money) away, you’re looking out for your future self,” says Saundra Davis, founder and executive director at Sage Financial Solutions, a San Francisco Bay Area-based nonprofit.

Regardless of whether your financial situation has changed, you may benefit from these saving strategies now or down the road.

What to do

Reduce costs: During an ongoing crisis such as a pandemic, you might need to redefine what is “unnecessary.”

Start with the bare essentials — rent or mortgage, utilities, food. When you factor bills in, don’t treat them all the same. For example, paying your credit card bill in full every month is the best tactic, but in hard times, it’s OK to pay the minimum. For loan payments, see if your creditor can offer relief.

“Don’t have your lender deciding what you can pay,”

Davis says. “Sketch out your own budget.” Work with your lender to reduce payments or suspend them temporarily.

Adjust your savings goals: An emergency fund is a standard goal that involves building up three to six months’ worth of living expenses. But during an emergency, consider resetting expectations.

“If your income changes, you aren’t beholden to saving a fixed amount,” says LaKhaun McKinley, certified financial planner and owner of the firm MNM Vested in Katy.

The way you save might need to be tweaked, too. If you use automatic transfers from checking to savings accounts, see if that amount is still doable. If not, reduce the amount. Or, as a last resort, cancel the transfers and make one-off transfers when possible.

When saving, “the habit is more important than the amount,” Davis says.

Find a high savings rate: Opening a high-yield savings account at an online bank is a good strategy, regardless of the economic environment. The national average rate is 0.06 percent, but some online savings accounts are offering over 1 percent annual percentage yield.

Opening a high-yield account “can be such a simple way to earn more,” says Kelley Long, a Chicago-based certified public accountant and financial planner.

Get help from your community to save costs: If you’re experiencing financial hardship, call 211 or visit the website 211.org to learn about resources in your community, including food banks, meal services for seniors and students, shelters, mental health services and more. This may feel uncomfortable. But accepting meals or other support can be an important lifeline as well as help you save money.

Some relief is nationwide, including postponed federal student loan payments and unemployment programs, but your community might offer additional resources.

What not to do

Dip into savings without a plan: If you have an emergency fund and you need it, use it. But estimate the amount you need before withdrawing, and keep tabs on how you spend it.

You’ll eventually need to save up again, and you want to make that process manageable. It might help to settle on a minimum amount you need to keep in a savings account to feel OK.

“Everyone has a different feeling (for) what would give them that security,” Long says.

Withdraw from savings too often: Keep an eye on how often you turn to your savings account. Banks can charge a withdrawal fee if you go over six per month. During COVID-19, the Federal Reserve paused this rule, but it’s up to each bank to choose whether to charge the fee. Watch out for other fees, too, such as for overdrafts.