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Without an emergency fund, unforseen expenses could lead you to financial ruin. I’m Clark Palmer with your Bankrate.com personal finance minute.
Start your emergency fund with a specific savings goal. A general rule of thumb is to save enough to cover four to seven months of living expenses. A good way to start is to save $1,000 and work your way up to a reserve that covers several months of expenses.
Your emergency fund should be easy to access. But you don’t want it to be so easily accessible that you’ll make withdrawals for everyday expenses. Online banks are a good choice because you can’t just walk in and withdraw cash.
Setting up a direct deposit from your paycheck into your emergency fund will help you grow your fund steadily. And when you get a tax refund or commission check, add it to the fund.
Don’t forget to plan for one-time expenses that you know are coming, such as annual insurance or car expenses. You should only use your emergency fund for unforseen expenses.
For more information on growing your emergency fund, visit Bankrate.com. I’m Clark Palmer.