A break in employment, a leaking roof, car problems, or plumbing issues — when you need cash for an unexpected expense, where will it come from? If you don’t have money readily available to pay for repairs, you might have to rely on a high interest credit card to see you through. A better idea is to make sure you always have a cash cushion – an emergency fund.
How to get started
Generally, you want to have three to six months of living expenses set aside for emergencies. That may seem like an impossible goal, but start small. First, take a look at your income and expenses. There may be areas where you can cut back a little. Another option is to set aside a specific amount from each paycheck. This way you can work toward your goal a little at a time.
If you receive a tax refund, consider putting part or all of it toward your emergency fund. Deposit any bonuses you receive into your account, too, for even faster savings. And if you get a raise, increase the amount you’re contributing toward your emergency fund.
Stay committed to your plan
It may be easier to save and reach your goal if you set up direct deposits from your paycheck. Consider dedicating a dividend-earning account specifically for this purpose. The money is saved before you even have a chance to spend it. It may take a while to see your fund growing, but stay encouraged. Over time, the money you’ve added to the fund will also grow by continuing to earn dividends.
Make sure it’s there when you need it
Your money has to be easy to get to in an emergency, so Share Savings or Money Market accounts are good options.
If you’re currently an LGFCU member, you can open a second Share Account for your emergency fund with a minimum deposit of $25. There is a $1 service fee if your balance drops below $25. You can open a Money Market Account with a minimum deposit of $250. There is a $2 service fee if your balance drops below the minimum.
Remember to use the money for true emergencies only. And if you have to use it, make sure to replenish the account as quickly as possible.
The advice provided is for informational purposes only. Contact your financial advisor for additional guidance.