Saving for Emergencies
"A Penny Saved"
Disasters can be devastating, but recovery doesn't have to be a long and costly process. Do yourself a favor and start planning and saving for emergencies now. Being prepared is the key to reducing the amount of losses suffered in the event of a disaster. Having an emergency savings account that you can access immediately can be critical to recovery.
Planning by Saving
As a kid, you saved by putting a little of your allowance in a piggy bank. Now, you've got bills to pay, and it's not quite so simple. Thankfully, there are many ways to begin saving, so in the event of an emergency, you're prepared.
Setting Up an Emergency Fund:
- A Good Amount to Save
A general rule of thumb is to have enough in savings to cover your household's expenses for three to six months. You may need to save more or less than that, depending on your situation. So if you haven't already, consider opening a savings or money market account. Then total up your monthly bills and expenses, and figure out how much you'll need to save to be secure. If your monthly expenses come to $2,000, you may need to save between $6,000 and $12,000. If you have dependents, it's a good idea to aim for the higher target amount. - Set Goals for Yourself
When you know how much you want to save on a monthly and yearly basis, it's easy to track your progress and you avoid surprises when you need to put your savings to use. When you begin saving, know how much money you'd like to accumulate each year to know how much to save each month. - Easy Access
Money intended for emergencies should be available at a moment's notice. For example, if you keep it in a savings account you can simply withdraw funds when you need them. If you want to write checks, then you can put the money in a money market account. - Separate Goals, Separate Accounts
Tossing the money for each goal into one combined savings account seldom works; you know how the money may be earmarked, but in practice it's too easy to shift dollars around. Consider opening multiple savings accounts-one for each goal. By keeping the money separate, tracking your progress toward your goals becomes a far easier task.
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