Home » Financial Education » Creating an Emergency Fund

Creating an Emergency Fund

Creating an Emergency Fund

*Editorial Note: This content is not provided or commissioned by the credit card issuer. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by the credit card issuer. This site may be compensated through a credit card issuer partnership.

This article was last updated Feb 12, 2013, but some terms and conditions may have changed or are no longer available. For the most accurate and up to date information please consult the terms and conditions found on the issuer website.

*Last updated December 2014

Emergencies, by definition, are unexpected. They often occur in the worst possible moments, and some of them can be quite expensive. My father-in-law passed away last week (love ya dad), and that left my husband – his only son – and I to handle a multitude of final expenses in a very short period of time. We had no life insurance to rely on, or anything of the sort. Most 23 year olds in our situation would have crumbled under the pressure. Luckily, we had an emergency fund to help out in times like this. I cannot emphasize the value of that enough.

Hopefully you will not need to use your emergency fund under such upsetting circumstances, but there still may come a time when you need more money than you normally have to spare. That's where these tips come in. Here are a few quick ways to build up extra money for the unexpected.

Turn Saving into a Bill

Since I'm self-employed, I have a tendency to just spend my money willy-nilly. At least, that is what I used to do. Now I make a point to set aside X amount of money per week or per month to go into my savings. Some weeks I may save 50% of my paycheck, and other weeks I may only save $50. Nevertheless, I make sure that I treat my savings like a bill. If you tell yourself that you have to save rather than just giving yourself the option to, you are much more likely to get a decent stash going.

Make Some Genuine Sacrifices

If you are already maxing your budget every month, it may be time for you to reassess your spending habits. My guilty pleasure is eating fast food, which I still do far too often. A couple years ago, I was spending more than half of my monthly income just eating out. That is absurd. I finally decided to limit myself to either a certain number of meals a week or a total price for the meals, and I've stuck with that plan ever since. Sure, I miss having my #1 combo with curly fries and a sweet tea from Arby's every day, but I enjoy the money that sacrificing it provides.

Collect Your Extra Coins

Saving coinsIf you don't have the ability to save huge chunks of money at once, try something small. During my early college years, I used to pay for everything in cash. Then I would keep all of my change from my purchases until I actually needed it. Sometimes the change would only add up to $20, but one time it added up to over $200. It just depended on how long I could last without it. If you refuse to use your coins until you absolutely have to, you'll start to build up a small but successful emergency fund.

Hide Your Money Somewhere

Worried that your emergency fund will tempt you? Consider hiding it somewhere. This needs to be a place that you won't think about all day long, but it also needs to be somewhere you will remember when the time comes. One family member of mine hides money in picture frames throughout the house, putting multiple stashes in multiple frames just in case. My late father-in-law used to hide money and valuables in the lips under his sinks, which made sorting through his belongings quite interesting. Find a hiding spot in your home that you won't forget about, and then put your money away for safe keeping.

Do Not Put This Off

If you keep procrastinating, you're never going to have money to work with. Period. Quit tellinTime is moneyg yourself that you'll start saving next week, next month, or when such-and-such happens. This process needs to start right now. Medical bills, car repairs, burial costs, and more can be in the thousands, so every little bit counts. Even if all you can do is put $5 in a cookie jar, you can say that you took the first step towards being prepared.

Have a Logical Backup

On top of all the saving you do on your own, try to have one or two credit cards on hand for emergencies. These need to have a clear balance at all times so you can access the funds in them when you need to. If you end up saving enough on your own, great. If not though, these cards can be your saving grace. All they'll do is take up space in your wallet until you need them. Surely you can spare that.

No matter how terrible it may be to go through an emergency, it will be even worse if you are not financially prepared for it. Follow the suggestions above, and you'll get through a tough situation as smoothly as possible.

Recommended Posts:

Read More

What the Rate Hike Means for Credit Card Holders

Twelve months ago the Fed met to discuss rate hikes and experts expected a rate hike to come this past summer. The United States made it through the entire year rate-hike-free until about two weeks ago. The Federal Reserve decided to raise interest rates for the first time in seven years, and although it’s a […]

Read More

December 29, 2015