Every family on the planet should have emergency money for those few times that something truly unexpected happens in life that you really didn’t expect.
I know it may seem like you’ve heard it all before but really take the time for this to digest.
There is a very good reason that every household should have emergency money that can easily be accessed and we’re going to go through those in just a moment.
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What is emergency money/ emergency fund?
Having an emergency fund should be a non-negotiable situation in every home but sadly this is not the case.
Most people live hand to mouth and simply feel that they don’t have the means to put away any rainy day money.
This is completely the wrong way to look at it.
An emergency fund is money that you store away in case of an EMERGENCY.
It is money that is your safety net. You should not look at this money like normal everyday savings.
They are in fact different.
Emergency money will help get your child that operation that they desperately need for which there is no government assistance or the roof that just fell in because there was a storm last night.
Or that last minute flight that you have to catch because a loved one is about to pass away.
These are real emergencies that need you to be prepared for.
Wanting to upgrade your TV or needing a new dress for the office party is not an emergency.
Wanting to go on holiday is not an emergency.
Even needing to upgrade to a bigger house is not necessarily an emergency.
It’s important to know the difference.
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Why you need an emergency fund
Having access to an emergency fund means that you won’t have to start calling up friends when something goes wrong and praying with all your might that they will have some extra cash lying around so they can help you.
Having an emergency fund means that you can make that emergency payment straight away without any delay.
It could even be the difference between life and death.
Your emergency fun can’t be your reliance on other people to dig you out of a ditch.
At the end of the day, it’s not technically their responsibility, it’s yours.
If you lost your job tomorrow, how long would you be able to survive before becoming financially destitute?
That’s a tough question and its one that most people like to avoid.
Can’t I just take out insurance instead?
There are lots of places you can take out insurance and you can take it out for many different purposes.
The problem with insurance is that you can never guarantee that the insurance will cover you for exactly what you want it to.
Whilst it is good practice to be covered by insurance, you need to know if that insurance will cover you for an unplanned trip abroad or if it will cover your medical expenses to the level that you need it to.
Relying solely on insurance is a risk.
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How much should I save as an emergency fund?
That’s a variable question because it will vary from house to house.
The general rule of thumb is that you should have enough emergency money to last for at least 3 months if you were to lose your job.
If that seems unobtainable to you then I would say start with trying to put away $1000, to begin with.
I’m not sure how many of us can truly say we have that amount put to one side.
Obviously the more you can save the better off you will be for it. so save as much as you think you can. One day you will be very glad about it.
Life has a way of throwing up unexpected expenses so it’s better to be overprepared rather than under.
What if I don’t have enough money to be able to put away an emergency fund?
You’ll be surprised at the different places where savings can be made.
Let’s be honest, usually when we need money for something that is not really that important we always seem to find a way to get the cash for it even when we can’t afford it.
It’s always possible to save money even when you don’t have a huge income.
The money you save may not seem that much to you at the time but it is just the start. We all have to start somewhere.
Here are 5 places you can find extra cash
1. Gym membership
Americans spend $1.8 billion on unused gym membership.
Is your money part of that $1.8 billion?
If so then its time to admit it and cancel that gym membership. If you are not making use of it, cancel it.
If you are not sure then take the time to calculate how many times you go to the gym each month and how much you pay for it every month. Does it seem worth it to you?
Perhaps see if you can find a cheaper gym or ways to exercise without needing the gym.
2. Should you be watching all that TV?
We used to have a TV service that we paid for religiously every-single-month just out of habit.
When we took a step back we realized that we didn’t actually watch it that much. My husband was out at work 5/6 days a week and I didn’t have much time for tv while the children were very young.
Most of the time we were only watching children’s programs.
If this rings true for you too then its time to give your TV service a call.
You might be able to downgrade your TV package for a cheaper one or cancel it altogether.
3. Give your electricity provider a call
You’ll be surprised but there is usually a saving to be made here.
Just give your service provider a call and see if you are on the most cost-effective plan for your family.
It will literally take you a few minutes and you could possibly save hundreds of dollars.
4. This is a great time to declutter
Get rid of all that junk that you have lying around the house.
We are all guilty of hoarding to some extent but by getting rid of old toys or clothes and equipment that you no longer need you will have some cash to store away in your emergency money fund.
You can either have a yard sale or sell the items on eBay.
5. Cut down on unnecessary expenses
Every household has them.
- The excessive grocery bill
- The clothes that you buy each month that you don’t really need
- The takeaways that you buy every Monday, Wednesday, and Friday.
- These are all things that if you potentially cut down on you could save hundreds each month.
Where do I keep my emergency money once I have it?
Keep it in somewhere like a bank account that can’t easily be accessed.
You can make it a 2 signature account so you can’t access the money unless two of you visit the bank.
You can open a separate account and leave the debit card with a friend for safe keeping.
There are a few options that you can play with here. Just don’t leave the money in your regular everyday bank account.
If you do this, the money will deplete very quickly without you realizing it.
Quick tips to help you save
1. Go over your budget again
2. Take part in a no spending challenge
3. Participate in a money saving challenge
4. Set up a savings goal that you and your partner both stick to
Final thoughts on building up your emergency money
It’s so important to know what your money is doing.
If you don’t make plans for your money you will abuse it.
If you are already quite money savvy then its a good idea to get that money working for you.
There is no rule that says you have to put it into a regular savings account and leave it there.
If you have the financial know how you can invest the money so that it’s working for you whilst it is sitting there.
Just make sure you can have access to it at short notice.
Apart from that, happy saving!
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