Emergency Funds: A Way to Control the Uncontrollable

Life has a funny way of surprising you. It likes to toss things at you when you least expect it, test you at the most inopportune times and teach you lessons you rarely want to learn but need to learn nonetheless. That’s why, should an emergency occur, your best bet is to have an emergency fund.

What is an emergency fund?

An emergency fund is an account, or money, set aside should a personal financial dilemma occur.

Why is an emergency fund important?

Life is unpredictable. For instance, your long time job that you’ve been at for 20 years, could lay you off tomorrow. You want to make sure that you have enough money saved up to continue to pay bills, buy groceries and provide for yourself until you can find another job.

When should you use an emergency fund?

Emergency funds should be used only in the case of an emergency, such as, being laid off, a medical emergency, and large repairs for your home or car.

When should you not use an emergency fund?

If it isn’t an emergency, don’t touch it. It may be tempting to use the funds for an awesome piece of furniture or for that luxurious vacation you’ve been planning since you were young, but don’t. Chances are pretty great that you’ll need those funds at some point in the future.

Where do you keep an emergency fund?

Some people keep their emergency funds in safes or safety deposit boxes, whereas, others open up a separate savings or checking account that they deposit funds into on a regular basis.

How do you save for an emergency fund?

Not everyone has an excess amount of money they can set aside. Sometimes you only have $10, $20 or $30 dollars a month that you can spare. That’s more than enough and you’ll be surprised what that accrues to over a large period of time. When in doubt, pay your debt first (i.e. student loans, mortgage payments, etc.) and if you have a little left over, use that to fund your emergency fund.

Who should have an emergency fund?

Everyone. No matter who you are or how much money you make, you should always try to ensure you have some financial cushion. The unexpected happens to everyone at any time. You want to be as prepared as possible.

They say it is better to be over prepared than under prepared. Things happen in life that you can’t control, so make sure that you’re ready for it. Set up an emergency fund and, also, make sure that you, your family, your home and your belongings are insured. Should things spiral out of control, you want to make sure you have all your ducks in a row.