I did not know an emergency plan was needed when it came to financing. Growing up it was all about having one major savings account.
Imagine my surprise when I started learning about being financially sound and the need for an emergency fund. Yes, not just savings but money you use for emergencies.
The emergency plan is not the same as your regular income. It is a separate account you open and make deposits in to ensure you can handle the unexpected. I even learned it was more important to have an emergency fund before a huge savings account.
Why you may be asking would a person need an emergency fund?
Glad you asked, because I am excited to share what I know with you.
What is an emergency fund?
Personal money you will set aside in an account used only for those unexpected financial mishaps that take place in your life. For example unforeseen medical bills, or even major car repairs or even unemployment.
Why do you need an emergency fund?
An emergency fund is like having insurance in life you pay on, never knowing when you will need it. With an emergency fund, it acts as a safety net catching all the financial weights that may possibly pull you down into debt. With the money, you save you can protect yourself from using credit and getting into a deeper hole.
You are probably wondering how much should I save?
Everyone’s financial circumstance is different but I would suggest begin with 500 and build from there. The goal is to save enough money for three to six months of income to avoid hardship.
It may appear impossible to you right now to have several thousands of dollars in an account, but you can do it.
We have had to stretch our money over the years taking care of seven children and totally understand what it feels like to not have an emergency fund.
In order to start building our account, I sat down and reviewed areas in my life that I can cut back on and use the money to place in the bank.
One thing I would tell myself was this; small things add up. Take twenty or fifty dollars as your first deposit, then commit to making weekly deposits into the account until you reach your goal. Before you realize it your account has over a thousand dollars.
Say no to some things.
Not eating out, shopping, cutting back on pleasures that are a waste really adds up. You can find money in hidden areas of your life.
One year I decided to do my own hair and use the money I would take to the Hair Salon as my savings money. I also stopped over buying for a rainy day and started saving for a rainy day.
Here is the last tip for your emergency fund I learned.
Open an account where you can get the best interest on your money. All savings account are not the same. All banks do not offer the same things. Make sure you can access the bank easily. As a reminder, you should have two accounts. One is savings that you don’t use the other is emergency savings account that you use and replenish when it goes down.
Do not wait for your next emergency to happen before you make a change in your life. Educate yourself and start today.
By failing to prepare, you are preparing to fail ~ Benjamin Franklin
Happy Emergency Saving:)
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