How To Establish Emergency Money

How To Establish Emergency Money



How to​ Establish Emergency Money
Inevitable and unexpected things can happen anytime .​
And life always gives us surprises,​ leaving us with expenses that we​ usually didn’t plan for .​
Sickness,​ accidents and other form of​ injuries can come and your budget may not be enough .​
Such occurrences can create debts and you cannot recover easily from it .​
It is​ for this reason that emergency money is​ really needed now and again.
Emergency money or​ fund is​ money that you set aside not as​ an​ investment or​ savings but for emergency purposes .​
It isn’t money for groceries and other needs but strictly for emergencies .​
Establishing an​ emergency fund is​ always important especially in​ bad times .​
What matters is​ you set the​ money aside consistently then gets it​ only for real emergency use .​
The success of​ your emergency fund depends more on​ consistently saving your money and leaving it​ there unless there’s an​ emergency .​
It is​ advisable that your emergency money contains about three months’ worth of​ living expenses .​
It doesn’t mean that your emergency money should be equal to​ your salary for three months,​ but you have to​ make sure that the​ money you put away for this purpose is​ enough to​ sufficiently handle whatever emergency that may come up.
It is​ way easy to​ calculate the​ amount that should go to​ your emergency money .​
What you need is​ enough amounts to​ cover the​ rent of​ your apartment,​ to​ pay for your bills and your car,​ to​ purchase food and cover other expenses for a​ normal month .​
Experts based the​ three-month rule from the​ reality that majority of​ short-term incapacitating sickness need almost three months to​ heal and recover .​
You should make sure that your emergency money is​ a​ liquid investment that’s very accessible .​
Of course,​ there’s always a​ risk that if​ you don’t have that self-control,​ you can easily get your money for impulse shopping,​ vacation trips and for buying some needed equipments .​
Because of​ this,​ you need to​ lock your emergency money up and hide the​ key .​
The best thing that you can do to​ secure your emergency money is​ to​ put it​ in​ a​ very liquid account like money market account or​ savings account.
Money Market Funds .​
The most famous option is​ money market account .​
This is​ a​ liquid investment that is​ short term and can be accessed through mutual funds and several banks .​
These banks and mutual funds also provide cash type liquidity .​
Putting your emergency money in​ a​ money market account will give you nominal rate of​ return that’s above the​ average savings account rate of​ a​ bank.
Savings Account or​ Certificate of​ Deposit .​
Other option that you can possibly do to​ your emergency money is​ to​ put it​ in​ savings account or​ some other assets which can be liquidated easily without taking a​ loss .​
There are lots of​ CD’s that would meet this criterion and can be considered as​ an​ option .​
Putting a​ portion or​ all of​ your emergency money into a​ CD or​ certificate of​ deposit will give you higher interest rate .​
When your certificate has already matured and the​ interest has been gathered,​ you have the​ choice to​ transfer it​ into a​ savings account or​ you can put them again in​ a​ shorter-term certificate .​
Remember that the​ longer the​ term of​ your CD,​ the​ higher its rate will be .​
However,​ you have to​ make sure that you didn’t lock up your emergency money for too long,​ because you might beat its purpose of​ having an​ easy access.




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