How to start an emergency savings fund
May 10, 2009 by Jennifer Chait
Filed under saving money
With job uncertainty, health care costs rising, and all the ups and downs of life in general, a super smart move is to plan for and save for an emergency savings account. Here’s how to get going with an emergency saving plan for your family…
Figure out your spending habits: The first thing you’ll need to do is sit down and figure out how much you NEED per month for necessities, and secondly how much your family spends over that amount on a monthly basis. Come up with a final monthly figure you’re comfortable with. Some people are great about spending only what they have on only what they need. Other families sometimes spend more even when they shouldn’t. Be honest when choosing a final figure or you may run short.
Figure out a time-frame: Most experts recommend saving 3-6 months worth of savings in your emergency fund, but aim for the high end. You’ll be more comfortable and with the job market lately, aiming to save more is just smarter.
Track your cash better: If you don’t have any cash left over at the end of the month that can be earmarked for an emergency fund, you’ll need to super track where your cash goes – to the penny if possible. Almost every family has an area that can be cut more in their budget.
Where to put your savings: According to H&R Block, “Financial experts agree that for liquidity, safety and yield, the best options once your emergency fund grows to a three- to six-months size is a bank money market account and a high-yield savings account, both of which are FDIC-insured up to $250,000 per account (effective through December 31, 2009 when it will revert back to $100,000 per account), or a money-market mutual fund.” Although you can just use a savings account too, but keep in mind that your money won’t grow as quickly.
Do you have an emergency fund saved up… where are you keeping it?
[image via stock.xchng]
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