Emergency Fund - Do You Have One?
Do you have a safety net savings account for that rainy day when your car breaks down and you come home to find out your heating and cooling system is out at home?
If you don't, you should!
In my opinion, the number one reason people do not achieve their financial goals is debt. If you do not have an emergency savings fund you will have to go into debt to finance the next curve ball life throws your way.
So how much should you save in your emergency fund?
Most budget experts recommend that you keep 3-6 months worth of expenses in an emergency savings fund. This means that if your monthly household expenses are $3,000 then you should keep a minimum of $9,000 in savings.
I believe this is good advice and chose to follow it myself. I recently had a rear tire blow out while driving on vacation. Nine hundred dollars later my car was repaired and we were back on our way.
While I was unhappy about the expense, it did not phase us financially because we had plenty of money in our emergency fund to cover the cost. We then replenished the nine hundred dollars the following 2 months by saving some excess income.
I recommend that you set up a separate savings account specifically earmarked for your emergency fund. This will decrease the likelihood that you will make an impulse buy and spend this money, as if it were in your regular checking account.
It is very easy to link your checking and savings accounts so that if you want to move money online from one account to the other you can do so for convenience.
Most savings accounts are not paying a high amount of interest, but if you look hard enough you should be able to find a rate around 4% with a credit union or local bank.
I encourage you to start your safety net savings fund if you don't have one already. It is the first step in establishing a good financial plan.
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