Emergency funds are an important part of your financial budget. Saving for a rainy day can help you avoid going into debt when a crisis strikes and can save you some of the stress that comes with a job loss or hospitalization.
As soon as you are old enough to take the burden of an emergency, you should start thinking about starting an emergency fund. The sooner you start saving, the more money you’re likely to incur by the time an emergency actually happens. Don’t fall into the mindset that it won’t happen to you. In the case of an emergency, it’s better to be safe than sorry.
Different emergencies are relevant to different people. You may need to save for losing a job, your car breaking down, home repair, or a hospitalization. This may affect how much money you need to put away but in general, experts recommend setting aside three to six months’ worth of living expenses.
To build your emergency fund, start by setting a monthly savings goal to get in the routine of putting money aside. Decide on a percentage or amount of money that comes out of your paycheck or income to go directly into your savings account. Consider using a high yield savings account which insures up to $250,000 for storing your emergency fund.
You may also want to keep a jar in your home where you can put any lose change or bills as well. As soon as it gets full, head to the bank and deposit the money. You may be surprised how much cash a small jar can really rack up.
Keep in mind, an emergency fund is for emergencies only, not for events such as holidays or birthdays.
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AZ Insurance Team
*All policies are a little different and this may not be applicable to your insurance policy, talk to your agent to see what your policy covers.*