Emergency Savings, Everyone Needs them Sometimes
An emergency savings account is necessary for your financial well-being.
Life’s unexpected surprises often have financial costs. However, with a little planning, an emergency fund can help you to successfully weather these small storms. An emergency plan will also help you to avoid using high-interest credit cards, personal loans, or prematurely withdrawing money from your retirement funds.
Although there isn’t a specific amount you should set aside for emergencies, experts often recommend three months of your salary. Such an amount will help if you happen to lose your job or stop working for a time.
As you get started, you’ll want to think about where to put this money. Although hiding it under the bed won’t fail you, you might be better served by placing it in a secure FDIC insured savings account. If you choose to do this, it’s a good idea to put it in an account separate from your main checking or savings account. Another plus to putting it in a secure account? Your money will earn interest. It’s likely that you’ll also be less tempted to use this money for non-emergency expenses.
If it helps, treat putting money into your emergency account as if it is a bill, and choose a realistic sum to pay into it each. Over time, your money will grow into a fund that will help you to overcome life’s unexpected surprises.
Remember, an emergency fund is a type of savings for short, abrupt moments of fiscal necessity that require an immediate response.