Previous posts have covered budgets and goals, which are necessary building blocks for a strong financial future. Another important element is the emergency fund. Once you decide on your goals and create your budget, funding your savings against future emergencies can keep you on track when bad stuff happens.
One of my dad’s favorite sayings is “Just remember, life doesn’t always match the picture in your head.” He was right. I always imagined the perfect ideal, but reality often turned out quite different. The thing is, nobody really knows what their future holds.
Even if you currently have a steady, high paying job today, and you think it will last years into the future. . .well, in reality you can’t predict the future. Your company could shut down, or you could get sick or suffer an injury.
That is where the emergency fund comes into play. When something bad happens, it cushions the blow. If you lose your job, and you have 3 months living expenses saved, you have a little time to find a new position. If your car breaks down, and you have $1000 saved, you can get yourself back on the road faster. Not only will this prevent a lot of stress, but it should also keep you from sinking into debt.
A good emergency fund is accessible. . .but not too accessible. In my next post, I’ll write about smart ways I’ve found to create and manage this type of savings account. Stay tuned!
Do you just open an account specifically for your emergency fund? A savings account maybe?
Hi Angie! My recommendation is that you do create a separate savings account just for your emergency fund. I’m actually going to cover that in the next post, so check back for more info! Thanks for your question