We understand that many people have been affected financially due to COVID-19 economic conditions and have been forced to make some hard budgeting decisions, including depleting their emergency savings. If that’s the case, we’re here to help – please let us know how we can be of assistance. Show
To clarify, an emergency fund isn’t filled with ready-to-spend cash for when you find a great deal or feel like splurging on a weekend getaway. It’s money you’ve planned to set aside for emergencies only. No matter your circumstance, discipline and planning are vital to creating an emergency fund. Whether you can start today, tomorrow, or in the near future, here are four reasons it’s important to have an emergency fund: 1. Soften the blow of unemploymentA savings account with several months of living expenses can help to pay for necessities while you search for another job and apply for unemployment benefits. 2. Manage medical emergenciesMany of us enjoy employer-sponsored insurance; with job loss comes the loss of healthcare. The Kaiser Family Foundation estimates that, in no small part due to Coronavirus-related economic conditions, 27 million people could potentially lose their employer-sponsored insurance and become uninsured following job loss. Across our country, medical issues are going unchecked because Americans just can’t afford to pay the bills. Medical care has become much less affordable – according to healthcare.gov, the average cost of a three-day hospital stay is around $30,000. Having an emergency fund as part of your financial plan can help you and your family cover a potential medical emergency. 3. Handle major household repairsWhen it comes to emergencies, we’re talking “must-fixes”, not cosmetic upgrades that will make your home (or car) sparkle and shine. Here are a few examples of potentially essential repairs from HomeAdvisor.com’s True Cost Report:
Home repairs can be expensive, so having an emergency fund can help alleviate stress should the unexpected happen. Just make sure you don’t tap your emergency fund for anything that’s not essential to basic living. 4. Build for the futureIf you’re already saving money, that’s fantastic. Now, set aside a small amount into a separate savings account, too. Presto! You’ve just created an emergency fund! We recommend having an emergency fund that’s three times your monthly expenses. That may seem like an insurmountable sum at first, but you can get there. Start small, and you’ll be able to check off significant achievements in a hurry.
Need help? Partner with a credit union like 1st United to build the emergency funds you need to thrive. We can offer suggestions on different ways to make savings easy, such as automating it. Send us an email or call us at (800) 649-0193 to let us know how we can help you take your first – or next – step on your journey to better financial health.
Everyone faces unexpected expenses or financial emergencies at some point in their lifetime, from a medical event to a car repair to a sudden change in housing. The key to weathering these financial predicaments without taking on debt is an emergency fund. An emergency fund, or contingency fund, is money set aside for unexpected financial emergencies or expenses. This cash reserve can help cover medical bills, home repairs, a loss in income or other urgent financial needs. How much should you have in an emergency fund? At minimum, most financial advisors recommend saving at least three months' worth of living expenses. However, with 51% of Americans reporting that they have less than that in their savings, the most crucial step is simply to start an emergency fund — and then helping it grow. Read on for more information about why an emergency fund is so important and how you can set one up. The importance of an emergency fundThink of your emergency fund as a financial safety net. Having money set aside in an emergency fund gives you access to a cash reserve when you need it most. That access is vitally important — without an emergency fund, your financial wellness could be at risk. Unexpected expenses may force you to take on debt or miss payments, creating additional financial stress in the process. It's important to note that an emergency fund differs from a rainy day fund, which is money often used for splurges. On the other hand, emergency funds are reserved for emergencies and designed to keep you out of a financial crisis. Emergency fund usesHopefully, you can avoid unexpected expenses. But if you encounter a sudden financial need, your emergency fund can help. Here are some things that you might use an emergency fund for:
These are just some of the unexpected events that would merit tapping into an emergency fund. Several other instances can also catch your finances by surprise and make you grateful for an emergency fund. How to set up an emergency fundWhen it comes to setting up an emergency fund, it's always better to start sooner than later. Once you've started saving, you can build your fund and lower any stress or anxiety about a potential financial emergency. Here's how to get started:
Decide where to keep an emergency fundThere are many different savings accounts to consider for an emergency fund, each offering various benefits. Broadly speaking, you'll want a savings vehicle that provides easy access to your funds, along with the assurance that you won't lose them. Some options for your emergency fund include:
As you begin to build your emergency fund, weigh the benefits of each option and find the one that fits your needs. For instance, you may choose a traditional savings account connected to your checking account because your emergency funds are easy to access. Or you may opt for a high-yield savings account to earn more from the money you're stashing away. Determine how much should you have in an emergency fundThe amount of money you save in an emergency fund will be specific to your needs, income and expenses. The goal will vary from person to person and family to family. That said, there are guidelines to help you save money. For example:
These guidelines can help you get your emergency fund going. But they're not hard and fast rules. The best way to save money is any way that enables you to save consistently and works in conjunction with your financial circumstances. Grow your emergency fundOnce you start saving for an emergency fund, you want to keep the effort going. Employ a few of these tips for building your emergency savings, and your personal finance situation will benefit:
Final thoughtsAn emergency fund can provide you with a sense of safety and financial security in preparing for the future. That way, if you face unexpected expenses, you'll have a cash reserve to rely on instead of debt or credit. Building an emergency fund also allows you to practice saving for financial goals and create healthy money habits. Connect with a banker if you need help determining where to keep your emergency fund or how much to save. A banker can also help you establish attainable goals that make your emergency savings a success. This information is governed by our Terms and Conditions of Use. Why is having a fully funded emergency fund so important when it comes to your financial well being quizlet?Why is having a fully funded emergency fund so important when it comes to your financial well-being? The purpose of an emergency fund is to set aside money for unexpected financial emergencies and to provide a sense of financial security. You should keep your emergency fund in the same account as your spending money.
What is it important to have an emergency fund?It helps keep your stress level down.
If you're living without a safety net, you're living on the "financial" edge—hoping to get by without running into a crisis. Being prepared with an emergency fund gives you confidence that you can tackle any of life's unexpected events without adding money worries to your list.
What is a fully funded emergency fund?So, what is a fully funded emergency fund? According to Ramsey, it means you have enough money in a savings account to cover three to six months of living expenses.
|