Sure, you know you should have an emergency account, but are you actually doing it? I’ll admit I’ve been one of those people who has known, but hasn’t acted. My wife and I have done a great job living within our means; however, for a time, we failed to build up a cushion in case something unexpected happened.
As is always the case, something always happens when you least expect it. We’ve had several instances where an emergency has happened, but we didn’t have the money at hand to pay for it. For example, we had the windows on our car broken by burglers and had to replace three tires.
We’ve learned from our mistakes and have started an emergency account. I feel much more comfortable knowing if an emergency strikes, it won’t pinch us as much financially.
Are you ready for these common emergencies?
Emergencies come in all shapes and sizes. Some are huge (like a car accident) and others are small (like replacing your tires). But even the small ones can hurt (especially if you’re a poor student). Here’s a short list of common emergencies that can definitely hurt your pocketbook.
- Replacing four tires on your car. Look to spend about $450 for that.
- Trip to the emergency room. I had to go to the emergency room last spring and it cost about $300 for the visit.
- Replacing break pads: $450
- Filling a cavity. Without insurance- $145. With insurance- $90.
How to set up an emergency account
First, determine how much money you want in your account. Most experts agree that you should aim for three to six months of basic living expenses. Figure out how much you spend each month and multiply that by three. That should be your goal. It may look overwhelming (especially if you’re a broke student like me), but I promise you that you can reach that goal. It will just take some time.
Second, open up an account. I suggest getting an ING Electric Orange checking account for two reasons. First, it has a nice 3.5% interest rate. That’s better than a lot of banks’ savings account interest rate! Your emergency fund will be growing even when you don’t put anything in it. The second reason is that it gives you easy access to your money when you need it. An ING Electric Orange comes with a debit card, so whenever an emergency hits, just whip out the card. The last thing you’re thinking about in an emergency is transferring money from savings to checking.
Third, set up an automatic savings plan. Decide how much you can afford each month to set aside in your emergency fund. It doesn’t have to be much. Just get started! Once you decide, set up an automatic deduction plan from your checking account to your emergency fund. ING makes this super easy.
Simple ways to save for an emergency fund
If you want to reach your savings goal, you’ll have to find more ways to save money. Here’s a quick list of easy things you can do to start saving money for your emergency fund.
- Brown bag it. Instead of buying your lunch everyday, start bringing it from home.
- Cut the cable. By getting rid of cable you can save about $50 a month.
- Entertainment. Instead of going out to eat and seeing a movie, stay in and cook a meal and watch a movie you checked out from the library.