Emergency Funds: We Never Know What to Expect
You probably noticed how many things happen when you don’t even expect them to. It’s nice, when they are positive and make you happy, but in everyday life it usually works the opposite way. Pretty often due to different reasons we have to use an emergency fund.
Problems, connected with a need of money are related to job loss, sicknesses, utilities and car repairs and anything that requires a purchase. There’s no way you can rely on credit cards or loans. There are also a lot of lending services providing online cash for your needs in a short period of time.
Of course, you can’t create money, so you should think about emergency situations in advance and start saving them. When something occurs, usually people don’t even have time for quick money search, so there’s no better way, as this one.
How much to save?
According to experts, who’ve been investigating for a long time to find out the answer to a question “how much should an emergency fund be?” they concluded: a person should put off an emergency fund, equal to 4 months of his living expenses. It could get higher, if you have children. In that case the best way for you would be creating an insurance plan.
Someone can ask, why we need to have that much saved, but the answer is totally reasonable: most of the time we have to use an emergency fund because of the sudden loss of income. Imagine your company suddenly falls apart and you are fired. There’s no way you are going to find another job faster, than in 1-2 months. Meanwhile, bills don’t wait, and you must pay for them. That’s why money, saved in advance, would be of your help.
What to start with?
Sometimes it’s really hard to start saving money for an emergency fund due to a tight budget or reaching your financial goals, however there’s a way to make it easier. Open a new savings account, if you don’t have one yet. Afterwards, try to follow a pre-made plan of regular depositing into an account. Start with putting, for instance, $10 a week or so. As soon as you create a habit you won’t notice how fast the money would accumulate in there, and may be after a while you can even increase the deposit to $15.
Protect your savings
Having your emergency fund saved in a bank is really important. If you decided to keep going and change a savings account to something else that would “work on you” and earn interest, you can definitely move on. Money market and CDs are also nice things to pay attention to. But don’t trust stock or mutual fund – they tend to lose all your money in a short period of time.
Keep in mind that wherever you are going to save your emergency fund in, you must have an easy access to them any time; in other way during emergency situations you won’t be able to get money out of the bank as fast as possible.
Marie is an accomplished financial consultant writing about socio-economic problems as well as legal and financial articles on debt, bankruptcy, stock market and high dividend stocks, credit card, financial planning, personal injury on various websites. She has been writing for the last 5 years.
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