Helping You save for Emergencies
Life is unpredictable and so are emergencies. Emergencies may happen regularly or rarely, but we must always be prepared. It is always helpful to have some additional cash on hand when these situations arise. Preparing ahead of time and putting money aside for emergencies can help you avoid a financial hardship the next time something unexpected happens.
What is it?
An emergency fund, as the name implies, is money set aside for unforeseen circumstances. It is a personal budget set up as a financial safety net in case of unexpected expenses or mishaps in the future. It is used to cover things such as, unexpected medical bills, home appliance repairs or replacements, large automobile repairs, and unemployment.
Why does it matter?
So now that you know what an emergency fund is, you may think that it is a good idea for other people but that you do not need one right now. The truth is that an emergency can strike at any time, and the cost is usually larger than our monthly wages or credit card debt. Emergency funds provide a financial buffer that can keep you afloat in a moment of need, without having to rely on credit cards or high interest loans. If you have debt, having an emergency fund is extremely crucial because it can help you avoid borrowing more.
How much should I save?
Because each person's life and financial circumstances are unique, there is no single answer to this question. How much you save will be determined by your income and the amount of money you have committed to loans and expenses. It is recommended, however, that you save enough money to cover three to six months' worth of wages.
Where should I save?
It is critical to put this money in a savings account where you will be able to get to it quickly if the need arises. As a result, you should put this money in a savings account. One that will allow you to access your funds whenever you need them while still earning interest.
Here are a few pointers to get you started now that you have a good knowledge of what it is.
- Chart your monthly income and expenses.
- Set your emergency savings goal.
- Develop a plan to start saving.
- Put your emergency fund in an accessible place.
- Make contributions automatic.
- Stick to your plan.
