The key to reducing your stress may be increasing your savings.

Thing about it: How much better would you sleep at night if you had thousands of dollars in the bank? You wouldn’t be worried about unexpected bills. Emergencies wouldn’t cause financial crisis. And you could move confidently toward a future of prosperity.

If you’re just making ends meet, the prospect of an emergency expense can be terrifying. And the sad truth is that many people don’t even have money set aside for routine expenses, let alone emergencies.

Living like that creates a ton of stress and holds you back from the financial freedom you were made for.

Today, I’m going to show you how to reduce your stress by increasing your savings with a simple, easy-to-follow strategy.

Let’s start with a little inspiration: Here’s something the Bible says in Proverbs 27:12 — 

The prudent see danger and take refuge,
but the simple keep going and pay the penalty.

This proverb is making an important point. Expensive things are bound to happen in life, and if you’re not prepared for them, they can do a lot of damage to your finances. The smart thing to do, then, is to get in the habit of saving money. Not only will it give you cash to pay for emergencies, but it will also help you meet other long-term financial goals.

Today, we’re going to look at a three-prong strategy for saving money. Increasing your savings in each of these areas will put you in a great position for the future.

Increasing your savings is key to reducing your financial stress. The first step in that process is to create a good budget that will help you organize your spending and make strategic changes that maximize the amount of money you can put away.

Once you’ve got some money available to save, though, you shouldn’t just dump it all in one savings account. There are a variety of different things you should be saving money for, and keeping all your savings in one place is likely to muddy the waters and create confusion.

Instead, you need to have three different savings accounts, each with a different goal. Here’s a breakdown of three things you should be saving money for, each in its own account.

1) Save for semi-regular expenses.

Most of the things you spend money on come up over and over. You pay rent and utility bills every month, and you probably go to the grocery once a week or more. But there are other expenses that come up less often. And if you haven’t saved money for them, they’re likely to catch you off guard and cause unnecessary stress.

If you own a car, you probably have to pay registration fees on it once a year. You buy Christmas gifts once a year too.  And there are all kinds of other dues and membership fees that you pay on an infrequent basis.

Fortunately, it’s not hard to anticipate what these semi-regular expenses are, because they come up every year (or every few months). Figure out what your total of semi-regular expenses will be for a year. Then divide that amount by 12. The result is the amount you need to save for these expenses each month.

Put this monthly amount in a dedicated savings account. Then, when it comes time to pay one of these semi-regular bills, you’ll have the cash on hand and won’t need to worry about how you’ll cover it.

2) Save for emergencies.

As the proverb we looked at earlier reminded us, we live in a dangerous and broken world. And sooner or later, that’s going to cause an emergency that costs you some money.

Emergencies are difficult to predict but easy to prepare for. You should accept the fact that you’re going to face some kind of emergency every now and then. Once you’ve made peace with that reality, start a habit of saving money to pay for those emergencies before they happen.

If you don’t have any money saved for emergencies, work to get $1,000 in a dedicated savings account as quickly as possible. Work some overtime, take on a side hustle, sell some stuff — whatever it takes. Setting that money aside will protect you from a lot of potential emergencies and immediately ease your psychological burden.

Once you have that $1,000 in place, you might choose to use your spare cash to do other things like paying off debt. That’s a great idea. But once you’re done with debt, you want to come back to your savings habit and build that emergency fund even higher.

Ultimately, your goal should be to have so much in your emergency savings account that you could live off it for three to six months if you had to. It will take some time to get there — for most people, this takes a year or two of diligent savings. But once you get there, you’ll find yourself completely protected from financial emergencies.

3) Save for big purchases.

Chances are there are some big things you’d like to buy eventually. If you drive a car, you’ll probably need to replace it one day. You may want to purchase a home. And maybe you have bigger ideas too, like going back to school or starting a business.

These are all great things to do. But I want you to do them the right way. That means saving money to meet these goals instead of relying on debt. You should buy cars and computers with cash. And when you are ready to buy a home, make sure you have at least a 20% down payment — it will give you access to better interest rates and help protect you from volatile prices.

If you’re out of debt and have set aside a lot of cash in your emergency savings, your third savings account should be dedicated to these big purchases you want to make in the future. Thankfully, you’ll already have a great savings habit built from your semi-regular and emergency funds. So saving up for these bigger purchases should be second nature to you.

Saving money always requires dedication and hard work. But the results are incredible. Eliminating financial stress by increasing your savings is more than worth the effort.

Increasing your savings reduces your stress and helps you achieve financial freedom faster.