No matter where you live, emergencies are bound to happen when you least expect them; the furnace breaks down, appliances stop working, the roof starts leaking or a window gets smashed. The costs for repairs can be tough to stomach, unless you have an emergency fund.
Setting up an emergency fund is easier than you thin. These tips from Bankrate.com will help you handle unexpected surprises with ease.
- First, estimate how much money you might need for the fund. Experts suggest saving enough to cover four to seven months of expenses. Remember, this fund should not replace your entire income, and it should not be used to fund luxuries, like vacations, fancy new clothes or a new car (unless your existing one breaks down.)
- Keep funds accessible, but not so readily available that you are tempted to borrow from it. Set up a separate account from your regular checking account. Consider using credit unions, which allow consumers to open accounts with smaller sums of cash, or online banks, so you can’t withdraw money from a storefront location.
- Set up automatic deposits or transfers, so you know for sure that money will be saved each month and the fund will grow steadily, with little effort on your part.
- Be sure to use the funds only for emergencies, such as replacing broken appliances, replacing the furnace or paying your regular monthly expenses after a job layoff or during a lengthy illness.
- Begin slowly. Start with a deposit of $50 from each paycheck, then increase it gradually with each job change or pay increase. Set aside a portion of commission checks and tax refund, too.
With these simple steps, you’ll have greater peace of mind, knowing you are prepared for any emergency.