Delay in my Contractor job payment delay, my truck is about to breakdown and needed immediate fix and a must to do medical procedure for my son all of them hit me hard at the same time. I got in the midst of the storm and there is no escape other than take the hit but protect myself. I wouldn’t have taken that chance, if I didn’t have my saved store emergency funds.
Alright, What is an Emergency Fund?
As I was saying, I like to call it as a lifesaver fund. Life obviously will have unexpected happenings. There are plenty of situations like I mentioned which will hit us without any prior notice. You don’t have any choice to take on the expenses. You can try your best to postpone those expenses but some medical and emergency situations can’t be postponed. In those tough times, you really need to have some funds available to depend on to take care of it. These funds are emergency funds.
Why do you need it?
Life hits us hard at times and nobody knows when and how. It is better to take the precaution and be prepared. Instead of waiting for it happen and figure out at the time. So it is always good to save up some money for those emergency situations. I know lot of people are struggling to even meet their ends at the tough economy crisis and it might be tough to save for any funds.
If you are one of them, I would recommend to consider at least put away your tax refunds or any bonus payments as emergency funds. It will surely help you. Instead of depending on the plastic money(credit cards) and racking up the balance in that account which will hunt you down later. It is good thing to have a store of money to help you.
What are types of emergency fund?
It depends each individual. I have 2 types of emergency fund setup right now. Medical and Emergency funds in a savings account. I also have 3 more savings account just for the purpose to handle any Short term, Home and other unexpected expenses. I put away $100 a month on the 2 accounts and at least $50 on these 3 accounts. It eventually adds up and at year end I just put them in a CD which I can take out anytime with or without penalty. Also if my credit card gets hit by these sudden expenses, I just draw the amount according to the expense from these accounts and pay it off.
How much do I need as Emergency fund?
That’s a tough questions since it also depends on each individual. Many experts recommend at least 3-6 months of your monthly expenses. That might be a bigger amount to target for starters. So I would recommend at least start putting something away like $25, $50 or $100 every month and set a goal to reach around $1000 in a year or so and move up the limit if you haven’t used up your savings.
Just put your money in a savings account that way at least you have some interest for the amount every month and helps your money grow. It also helps to access the fund easy and faster.
Emergency fund is such an important aspect for a financial life avoiding stress and frustration which don’t really need at the time of emergency situations. So start thinking about it and save up for the hard times. You will surely appreciate my post when it happens.