14:33 23 March 2013
Every now and then, unexpected events take place and can cause a large hole in our pockets. Leaking roofs, losing a job, and car accidents for example are just some of things that catch us off-guard. If we don’t have the money to cover these unplanned expenses, we might resort to borrowing money from friends or from financial institutions.
As emergencies are already part of our lives, it’s wise to prepare for them. You can do this by setting up an emergency fund.
An emergency fund, as the name implies, is your savings (apart from your regular savings account), that you can use when there are emergencies. This should be at least 6-month worth of your salary. However, the more money you put in there, the better.
Where to start?
Open a separate account for your emergency fund. Every month, set aside a certain percentage of your wage until you save at least 6-month worth of your salary. Getting started might be a little difficult. You may need to sacrifice some things like eating at a fancy restaurant in order to save more money.
Where to put your emergency savings?
It’s important to make sure that your emergency fund is accessible and that it is placed in an interest bearing account especially if you have 6-12 month worth of savings. Look for either money market account or high-interest bearing savings account with check-writing privileges and which allows you to make withdrawals at any time.
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