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Financial Literacy - Emergency fund
Preparing for all contingencies
Unless you like living in crisis mode, it's essential to have an emergency fund. Learn basic strategies for building reserves.
Creating an emergency fund

Why do you need an emergency fund?

An emergency savings account comes to your rescue when unplanned expenses arise. The car breaks down, the roof springs a leak. These situations create a certain sense of alarm, not unlike emergency vehicles with high-pitched sirens and flashing red lights. But unplanned expenses can be handled with emergency savings -- the financial equivalent of a handy home defibrillator.

Emergency fund essentials

In the absence of that savings, credit card or high-interest rate debt often fills the void.

"If there is one thing financially that will help you sleep better at night, it's the knowledge that you have some money in the bank for a rainy day," says Bankrate's Senior Financial Analyst Greg McBride.

A lot of financial difficulties can be traced back to a few common root causes, according to McBride, and one of these is lack of emergency savings. For that reason you need to plan for the unexpected, whether for a dental bill or job loss.

How your savings can save you  
-- Posted: July 23, 2007
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