What You Need to Know About Emergency Funds
Tracking your spending? You might be surprised at how much money slips through the cracks over the course of the month. Make your emergency fund a high priority, and commit to making small changes in your spending so you can fund it.
What if I have to draw money out?
It happens to the best of them: Just when the emergency fund is getting full, the car breaks down or the baby gets sick. On the one hand, it’s frustrating to see your savings efforts wiped out. On the other hand, though, that’s what it’s there for!
When an emergency empties your fund, just thank yourself for your thoughtful planning, and start over.
What counts as an emergency?
This is something you’ll need to think about as time goes by. People who aren’t used to living within their means often think only of their monthly bills, and consider everything else an emergency. A visit to the doctor or dentist, a tune-up for the car, property tax and car insurance payments… In truth, these are just irregular bills that should be planned for.
A true emergency is one you couldn’t have seen coming. Someone hits your car, and suddenly you’re paying a $500 deductible. Your three-year-old water heater dies years before its supposed to.
Make This Work for You
…in 15 minutes or less
- Make a short list of things you will and won’t use your emergency fund for
…in 1 hour or less
- Open a high-yield savings account that you can link to your checking account
…in the long run
- Each pay period, move your savings into your emergency fund
- When you withdraw money from the fund, start building it back up as soon as you can