You should always have an emergency fund so that you can use it in need. For example, your spouse needs long term treatment or you lose your job; it such cases, your emergency fund will be very helpful in pulling you through your hard times. The general rule is that you should have three to six months of savings as your emergency fund. The best time to build up your emergency fund is right now. The sooner you are prepared to take care of your unplanned expenses, the better it is. You should keep your emergency fund in a savings account. You should let these unexpected expenses ruin your financial position. Dave Ramsey investments advisor smartvestor mutual funds Florida Brent Wadzita places much importance in the building up of emergency funds.
You should start building your emergency fund with some specific goal set. You should have enough emergency fund to cover your expenses, no your whole income. You should not forget that it’s emergency fund and it cannot be used for buying fancy clothes or going on vacation. You should start by setting small goals first, and then make larger goals. You can start by saving $1,000.
The emergency fund must be easily accessible. But you shouldn’t make it so easy to access that you can take it out for your grocery shopping. It is better to have an account that is different from the normal account. This will build up a psychological wall between the emergency fund and your spending habits. You should keep your emergency fund in several locations, like online savings account, savings bond or cash inside a locker in your home.
Consider keeping emergency funds in a combination of locations, including an online savings account, in savings bonds and as cash in a lock box at home. If you can’t keep significant amount of money in your savings account with low interest rate, then you have a money market account that let you withdraw money at minimum levels. You can also buy short-term certificates of deposits that have three to six month terms on a regular basis. This way you will earn interests that you will be able to reinvest constantly.
You should have a monthly savings goal and you must make it part of your normal budget. You can set up automatic monthly transfer. This will ensure that your money is saved monthly. If you set up direct deposit from your paycheck to your emergency fund every month, it will help you to build up fund steadily.