An unfortunate fact of life is that emergencies tend to pop up. A loved one passes away and we suddenly have the need to travel. We have the sudden need for repairs to our vehicle or to a major house hold appliance or to the house itself. It doesn’t matter the emergency it’s bound to happen and it will cost money.Another unfortunate trend is that people amass large sums of debt for such emergencies because they view credit cards as the quick fix. This poses a huge problem for people like me who are trying to work there way out of debt. However, there is a solution and it can be filed under preventative maintenance. It’s called an emergency savings account!
Building one takes time but will be well worth it when the time comes to actually use it. The key is to set a minimum amount that you want to build to and then never allow your account to go below that. For example, I have built my account to $1,000.00 and that will be my minimum. In other words I don’t want my account to go below that amount.
The key to building an emergency account is budgeting to do so. You know that you will need it so discipline yourself to build it up. Choose an interest bearing account and let your money set and grow. Remember interest is free money (that’s why credit card companies love it so much) so shop around to find yourself the best rate then plant your money and watch it grow.
Make deposits into your savings account as often as possible and never withdrawal until you have reached your minimum. Remember the larger your balance the more you will gain in interest so after you have reached your minimum withdrawal as little as possible and never go below your minimum. When tempted remember that your money sitting unused gaining interest is always better than a credit card balance gaining interest.
To help prevent misuse I opened my account at a bank separate from the one I do my normal banking at. I have no debit card or checks for the account. The only way I can get money from the account is to actually walk into the bank and withdrawal the money.
The best way to retire your debt is to never go into it. The best way to never go into debt is be prepared for a financial emergency.
4 comments:
Found you on blogmad, very informative blog. I have been down this road my friend and would venture to say that a lot of us have, I commend you for blogging on an issue of much importance, keep up the good work.
I suggest that people use a high-yield savings account for their emergency savings account. I use ING Direct and am very satisfied. If anyone is interested please let me know by e-mailing at bjone6@gmail.com.
Brandon
One of the major things I've realized is making sure I have an emergency fund for those situations that you don't expect. If you have an emergency fund and something unexpted happens it won't derail your savings goals. ING Direct offers a way to split your account into "defined" segments. I have "emergency" "down payment" "savings 1" and "vacation" I can allocate how much each section get whenever I want. If you want a referral link to get a $25 kickstart (only if you begin with at least $250) that is automatically deposited to your account, shoot me an e-mail at z3trkrnr@ gmail.com
This is very rich post. I especially suggest people to use
high yield savings accounts. I think these online high interest accounts are the best place to stash your emergency fund and save up money for your short-term goals. There are many options and goals, so you need to find out which suits you best.
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