Posted On: October 22, 2020 by Exchange Bank of Northeast Missouri in: Budgeting Personal Finances Save Money Savings Spending
With the recent events taking place causing widely experienced job loss, it’s been a clear reminder of how important an emergency fund is. When unexpected circumstances take place, having a fund to use for the time being will be what keeps the rest of your financial life going in a positive direction.
What’s an emergency fund?
An emergency fund is money you’ve set aside for unexpected expenses. This stash of money allows you to be prepared for the circumstances life throws at you rather than hoping nothing happens. The average recommended amount to save is 3-6 months' worth of your normal living expenses, but the more, the better.
In what circumstances would I need one?
You might be wondering in what kind of situations an emergency fund would come in handy. While the possibilities are endless and always unforeseen, here are some examples:
- Job loss
- Medical emergency
- Car issues or accident
- Major home repair
What’s not considered an emergency?
Don’t go through the process of saving for months just to spend it on non-emergent things. Here are a few examples of things you should budget for rather than spend your emergency fund on:
- Vacations
- Elective medical expenses (e.g. plastic surgery)
- Non-essential home upgrades
How can I start building one?
The first step to building an emergency fund is figuring out your goal amount. After finding out what your monthly expenses are, it’s time to develop a plan for your saving. Put your fund into a safe place, like a savings account, and stick to your plan, going beyond your goal once you reach it.
The year is coming to an end and 2021 will be here before we know it. This year, make it a priority to be prepared for the unexpected with an emergency fund. To get started, open a savings account with us today!
Exchange Bank of Northeast Missouri
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