Since I started this blog, I’ve been reading a lot of stuff by other personal finance bloggers. Almost all of them harp on having an emergency fund. It’s clear that this is a vitally important step on our path to financial success.
I’ll be the first to admit that I haven’t had an emergency fund in my past. I guess it’s because I felt that my money was best suited in other places, plus as a teenager it’s just one of those things you don’t think about.
The more I think about it though, I was setting myself up for a big financial hit should something unexpected come up and I didn’t have enough in checking to cover it. I’ve always had money in CD’s, but I really wouldn’t want to pull money out of those and have to forfeit all that interest. I would have been scrambling, and it wouldn’t have been pretty.
Having an emergency fund strengthens our budget immensely. Untimely expenses that would otherwise throw our budget out of whack can easily be accounted for. It can also give us peace of mind during events that are already stressful enough. Having a major car problem or an accident are stressful regardless, but knowing we have money to cover us is reassuring.
I recently opened a CD at ING. I couldn’t be happier with their secure, easy to use interface and their higher interest rates compared to traditional banks. I decided to use them to open a savings designated for emergencies. Another cool thing about ING is that it’s extremely simple to open sub-accounts for different savings purposes. Designate one as your emergency fund, start contributing to it regularly (easy with their automatic payment plan), and you’re set.
I only put $10 in there right now (pathetic, I know), but I plan to add to it regularly. An emergency fund is one of those things that you hope you never have to use, but is definitely worthwhile.
6 users commented in " Why You Should Set Up an Emergency Fund "
Follow-up comment rss or Leave a Trackbackyou know what, you gotta start somewhere bro! and considering you’re in school still, you’ve already accomplished more than 90% of the rest of us out there. haha…
i applaud you good sir.
Why thank you! I think I owe a lot of my motivation to bloggers like yourself that really got me interested in the subject.
Thanks for the visit back!
The really exciting thing about the emergence fund is that you can make it work really hard for you. Just because it’s saved for a “just in case” event, doesn’t mean you have to put it under the mattress. Congrats on the high yield savings account. I’ve also seen great rates at flagstar bank on their website.
I enjoy your blog. Thanks!
Millionaire,
Thanks a ton for the visit! I totally agree with you: an emergency doesn’t have to (and shouldn’t) sit in some .5% account somewhere. I’m so thankful for ING; do you currently use flagstar?
I do use Flagstar for personal and business accounts. They do a good job. My newest thing though is Prosper.com
You will probably like it. People who need loans bid on how much interest they can afford to pay. You then bid how much you are willing to lend them at that interest rate. Common to get 8% from folks with really good credit. Check it out and let me know what you think.
I’ve heard of Prosper before but never took the time to check it out. I will have to do that though.
Is it kind of nerve-racking to lend out money to strangers though? One bad loan would erase everything that you’ve earned from many good ones wouldn’t it?
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