Biyernes, Hunyo 3, 2016

4 Steps to Building an Emergency Fund - AGT The Safe Money People

Ben Franklin once declared, “A penny saved is a penny earned.” Yet, equally enlightening are his thoughts on expenses: “Beware of little expenses. A small leak will sink a great ship.”


And there are plenty of “leaks” that can scuttle an already-tight budget. For instance, a spouse idled by the sour economy, a fender bender with the family car, or an unexpected hospitalization. That’s why financial advisors recommend that you have a rainy-day fund—enough liquid assets to cover three to six months’ worth of emergency living expenses. In case of financial emergency, access to additional money will save you from relying on credit cards or loans that simply compound the problem.

When starting an emergency fund, here are a few tips to abide by:

1.    Determine what amount is best for you. Most experts agree that you should keep between three and six months worth of your living expenses set aside in your emergency fund. Your specific situation – whether you have children, carry substantial debt and types of insurance coverage you have – will determine what amount is best for you. Examine your situation — your income and your needs — to decide how much you should save.

2.    Start small. Starting an emergency fund can be as simple as depositing $100 into your high-interest savings account. But before you begin, be sure that you’re meeting your basic living expenses. And as you build your emergency fund, be sure you’re also reducing your spending and avoiding debt.

3.    Stick to a schedule. Get into the habit of making regular deposits. Whether it is weekly, bi-weekly or monthly, create a schedule and stick to it. Once you make saving automatic, you won’t even have to think about it.

4.    Consider an online savings account. In many cases, an “online” savings account may make more sense than an account at a traditional, bricks-and-mortar bank. That’s because many traditional banks are not currently offering a savings option with interest rates high enough to meaningfully beat inflation. In addition, an online savings account is a reliable way to manage your money.



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