How to Start Your Emergency Fund Now

Plan for the unexpected to avoid financial hardship

Life happens.

Natural disasters, job loss, break ups all occur and can wreak havoc on your finances if you’re not prepared. Saving for a rainy day could keep you from ruining your credit and declaring bankruptcy.

Here are a few tips to get started right away:

Start with the end in mind: Take a look at your expenses and determine how much it would cost to support your lifestyle. Experts suggest that people should save six to eight months of emergency funds. Be patient with yourself. Saving takes time, but remain diligent and keep in mind that this fund is for emergencies only – not new clothes, fancy dinners or travel.

Location, location, location: Where you keep the money is as important as how much you’re saving. Right now, interest rates are low so finding a bank that will boost your bucks might be difficult, but money market accounts are also an option. The minimum to open the account is higher than a normal savings account and there are penalties from withdrawing early but the yield will be greater. Online banks are another option. ING Direct and American Express deter customers from withdrawing their funds.

Treat it like a bill: Set a monthly savings target and stick to it. Treat your savings target like any other bill. Add this line item into your budget, and arrange direct deposit into your chosen savings account.

Keep key information handy: Do you lose passwords easily? Create a system that has all bank accounts, routing numbers, and who-to-call information readily available. Emergencies can definitely come in the form of natural disasters where no power and Internet is available.

     

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