Things you already know about your Emergency fund

1) You really should get one, you know you should, and you’ll get around to it as soon as you can start making headway against some of these bills.

2) See 1)

 Now what an Emergency fund is for is saving your tail in the event of something dire coming up. It’s not savings for a vacation, new PC or Big Screen TV. Part of it should be immediately accessible. The rest should be accessible within about 3 business days. Once you’ve got your credit under control (i.e. you have almost no debt) its ok to put the majority into a 30 day CD or something similar, charge the emergency on a credit card, and then pay it off immediately to avoid the finance charges (personally I prefer ING Direct to a CD – 4.5% APY no minimum deposit to get that rate and funds reach your account usually in 2-5 business days.)

 The Amount you need is about 3 months worth of Living Expenses as a rule.

You can usually have your employer put a portion of your paycheck directly into your savings account. Start small, say $10.00 a week to start with and add to it where you can, you should probably still concentrate on your high APR cards first but by aiming (remember Goals!) for a $500.00 starting emergency fund, that will cover a number of unpleasant things that can happen.

Once you’ve reached the 3 Months amount, you can start padding your nest egg. Ideally, this should be something like a Roth IRA if you’re eligible, but if you use the Emergency fund, you need to commit to refilling it again. Always diversify your savings strategy, and this needs to be funds you can liquidate quickly and rely upon, so don’t use it to invest in that “sure thing” that Uncle Ernie is convinced will allow him to retire to Antigua with.


~ by creditcardboffin on June 14, 2007.

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