Emergency Savings fund

Your emergency savings fund and why you can't afford to put it off any longer.

Inevitably emergencies will happen in life. Although we can take certain precautions to prevent some emergencies there are others we can do nothing about. In which case all we can do is try to have enough money set aside to be able to deal with them as they occur.

The most practical solution is to have an emergency fund. Your emergency fund should be enough to cover any financial crises or unexpected expenses such as home or auto repairs, uncovered medical expenses etc. Needless to say borrowing your way out on credit would only compound the problem by creating more debt.

Start small

Yes, it's true, most financial gurus do suggest an emergency fund with enough money to cover 3 to 6 months of living expenses but...For now, just start by saving a $1000, much more do-able than 3 to 6 months right? Plus $1000 is enough to cover minor expenses like car repairs or most other things that can pop-up unexpectedly.

Once you have $1000 put it in a savings account, DO NOT invest it right now! For the time being the money needs to be fairly liquid. Then you can start building the fund slowly up to 3 to 6 months worth of expenses. Once the fund starts to grow you should move it into something conservative yet will earn reasonable interest.

With your emergency fund in place you've taken "Murphy" out of the equation and are one step closer to financial security.

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