Thankfully we were all right, but the car door was in sorry shape. After receiving the quote on how much it was going to get it fixed – I was absolutely floored. We had insurance which reduced the cost of repairing the damage to our $1,000 deductible. Though this was the case, the deductible was still quite a chunk of change and without that emergency fund – we would be scrambling to come up money or worse be forced to put it on a credit card and let that amount accrue interest until we could pay it off. With all of the other things going on in your financial life – an emergency fund can seem like the last thing on your mind. I want to highlight just how important it should be to make it a priority. Below are some tips and some stories of why emergency funds are essential to our financial planning:
The best way to prepare for an emergency is before it happens – not while you are in it. If an emergency fund seems like a large task – start small keeping $50 - $100 every paycheck to save. It is better to have a small emergency fund – than to have no emergency fund at all.
Save it Securely
One thing I learned about having extra money around is that I am likely to spend it. If I have to think about moving the money from my savings account to my checking account – I usually think twice about doing it. For some of us – we may need to take this a step further and actually open another account at a different bank and keep the money there. If you have to drive across town to access it – you'll be less inclined to go get it. One other thing to mention is that you should make sure this account is "liquid" or not tied up in an investment such as a certificate of deposit or a mutual fund. You want to be able to access this money quickly after a crisis occurs in your life.
Some experts say that having a $1,000 emergency fund is enough, but it really depends on your situation. Other experts say you should have between three to nine months' worth of expenses saved. One of my friends had a financial crisis when her husband lost his job unexpectedly. They had saved up enough money in their emergency fund to make it six months without both of their jobs, and they used every penny. Once you have enough to help pay for insurance deductibles – keep going – you'll never know when you may need those funds.
Creating an emergency fund can be a daunting task, but if you smart small, make sure it's secure yet available if you need it, and continue to supply your emergency fund – you'll be prepared financially for whatever life throws at you.