According to a recent report on CNBC.com (which cited a Bankrate.com survey), some 57 million Americans do not have an emergency fund.
An emergency fund, whether small or large, is important for individuals and families as they encounter unexpected financial events that require an immediate—and sometimes large—amount of resources.
Emergency funds are never fun to save for or discuss or even think about. Yet they can be a lifesaver when that worst-case scenario strikes.
We don’t need to list what those worst-case scenarios are, because while they might be slightly different for each of us, we all will know one when we experience it.
And just like a worst-case scenario can be different for each of us, the amount of money to save for an emergency fund can vary based upon individual needs and obligations.
Here are a few suggestions to consider as you develop or build your emergency fund:
1. If you currently don’t have an emergency fund, start small. That could mean $1,000 or $1,500. Set your goal, develop a method for reaching that goal and then implement your plan.
It might mean setting aside $25 or $50 a paycheck, or forgoing that double mocha each morning at the local fancy coffee shop. Whatever path you determine for saving, be consistent and regularly remind yourself of the long-term view: establishing or growing a fund to help in a crisis.
2. Once you begin building your fund, you’ll probably discover it’s easier than you thought. If that’s the case, don’t stop saving when you reach your goal. Set a new standard, such as saving for 3-6 months of expenses or some other significant goal.
3. Consider separate funds for specific needs, such as a car fund and a home improvement/repairs fund. Once you get the hang of working on your emergency fund, consider a fund for car repairs when your mechanic hands you a bill for $1,000; a fund for house repairs, when your plumber says the leak will cost $850 to repair; and a general fund for health-related emergencies, sudden travel expenses or a variety of other possibilities.
4. Now that you have established an emergency fund—or several funds—consider developing a “blessing fund” to help others during difficult times. It doesn’t have to be a large fund, especially if you are operating under a tight budget. But $50 or $100 can go a long way to help someone who is in desperate need of a blessing.
These are just a few tips to get you started on the road to an emergency fund. Be creative in how you develop and grow your fund; be willing to forgive yourself when you slip a month or two; and remember that this money will relieve financial and emotional burdens when you need it most!
Sign up for our newsletter to get more just like it delivered directly to your inbox!