When money emergencies happen
The hot water heater breaks. A family member needs major dental work. The car needs new tires. When a major money crisis hits, what do you do?
Financially savvy and well-prepared families turn to their emergency fund, or money set aside to manage large, unexpected expenses or unanticipated circumstances such as a medical bill or job loss.
Creating and maintaining an emergency savings fund should be a priority for every family. Think of it as preparing for the proverbial rainy day, which we all know will come.
Families should establish an emergency savings account with any amount they can afford. For example, depositing $50 a month adds up to $600 at the end of one year and $3,000 in 5 years, with no withdrawals.
The important thing is to get started. Even if you save the change out of your pocket or billfold each night, it adds up. Along with making regular deposits in the fund, consider adding money from other sources such as bonuses, extra commissions, tax refunds and monetary gifts.
While financial experts suggest saving enough to cover 3 to 6 months of living expenses in case of job loss, families should initially try to accumulate $1,000 as quickly as possible.
The best place to keep the money you’ve set aside for your emergency fund is a savings account at a bank. As you’re saving, be patient. It may take some time to build up the emergency reserves, but don’t get discouraged.
Finally, in order to protect the growing fund, families should be extremely selective about when they withdraw money.
Buying a pair of expensive shoes, even if they’re on sale, is not an emergency. The less you take from the fund the easier it will be to get back to the previous balance after a withdrawal.
For more information on personal money management strategies, contact the nearest county Extension office.
— Danielle L. Wells is the Family & Consumer Science Educator for the Carter County OSU Extension Service.