You can’t prepare for an emergency, but you can prepare for what happens after one. An emergency savings fund is a crucial part of anybody’s finances because, as the name states, it’s what’s going to keep you afloat after the unthinkable happens–it’s the money that’s going to cover the financial losses you may incur when life throws your a hard, fast curve ball.
But this couldn’t happen to me
Say you get laid off, get into a car accident, get evicted, have your phone stolen, have a medical emergency or a natural disaster strikes; these are the situations in which you’re going to want to have some money–most financial experts agree you need three to six months’ worth of expenses–on deck.
As reported by CNBC, 47 percent of Americans said they either could not afford an emergency expense of $400, or would cover it by selling something or borrowing money. This is according to a 2015 report by the Federal Reserve Board’s Division of Consumer and Community Affairs.
So: Setting up an emergency fund may seem like a daunting task, but it’s extremely important–especially if you already have debt.
Tips to get you started:
- As is the case with most savings plans, make a budget and track your expenses. Figure out which payments you absolutely need to make, and which items (say, Netflix or coffee-shop coffee) you can go without.
- Consider using your tax refund as a starting point, or nice boost, for your emergency fund.
- Give your emergency fund it’s own savings account. That way, you won’t even think about reach into it to make unnecessary purchases.
- Set up direct deposit with your employer or automatic deposits with your credit union and have a predetermined proportion of your paycheck go straight into your emergency fund. That way, saving each month becomes an automatic process; you don’t even have to think about it.
What is your emergency savings fund goal?
Though it’s recommended that you have three to six months’ worth of expenses in your emergency fund, the actual amount you need is going to vary based on your individual monthly expenses, such as your student debt, your housing situation, whether or not you have a car, whether or not you have regular medical expenses, and so on and so forth.
And, remember: This isn’t a rainy day fund. An emergency fund is supposed to be there for you when you need it most; and, of course, any amount accumulated is better than none at all.
It’s easier than you think to start saving
When you’re ready to start an emergency savings fund at Dane County Credit Union, please call us at 608 256-5665, or visit any of our Madison, WI-area branches. We’re more than happy to sit down with you and do what we can to help you be prepared for what comes after an emergency hits.