What is an Emergency Fund?
An emergency fund is a savings account that is there for a rainy day. It can help you cover major unexpected expenses like car repairs, medical bills, and even unemployment. You need an emergency fund because it provides a buffer in situations that may otherwise have you take out high interest loans or increase your credit card debt. If you already have those kinds of obligations, or don’t have any savings at all, an emergency fund is essential to your financial health!
How Much Should I Have in my Emergency Fund?
The general rule of thumb is to have enough to cover three to six months of expenses. To calculate how much this would be, track your spending for one month to see about how much you should put away. Once you have your goal, you can start small. Even having a few hundred dollars can get you out of sticky situations.
How Do I Start Saving?
Once you’ve tracked your monthly expenses, set a savings goal and write it down. Then stick to it. Automating savings will help you put money away before you can spend it. Some employers offer an option to put a percentage of your paycheck into a savings account. If this is an option, putting away even 5-10% of every paycheck can add up quickly.
Where Should I Keep my Emergency Fund?
Your emergency fund should be kept somewhere it can be easily accessed. It should not need to be liquidated or moved around before you access them because emergencies are unexpected — you won’t want to wait for the payout. Consider a savings account with a high yield, an account that automates savings, like a free Kasasa Saver account, or a Lucky Savers account where you are entered to win money every time you deposit $25! If you have any questions about setting up a savings account or the types of accounts available to you, don’t hesitate to contact us at 800-438-7415 or palisadesfcu.org. We are here to help you.
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