Funds Blog

What Is An Emergency Fund?

What is an emergency fund? This is a question that is often asked by people who don’t have one.

An emergency fund is a special fund into which money is deposited on a regular basis. this money is intended to be used in the event of an emergency only. If you have a regular paycheck, a given amount determined by you is put into that fund on a regular basis.

Why have one? The best reason is so you don’t have to put the cost of an emergency on a credit card. You will still have to pay for it, and it may cost you a whole lot more money if it takes you more than the remaining part of your credit cycle for that month to find the money to pay the bill.

How do you get an emergency fund? each time you get paid, you put money from your check into a separate account for emergencies.

If you have an income, take a portion of every paycheck and put it into your emergency fund. If you do not have a steady income, you have to be a bit more frugal. If you eat out a lot, cut back. Put that money into your emergency fund. If you go to movies, borrow movies from friends or the library, and make your own popcorn. Put the ticket and popcorn movie money into your emergency fund. Stop impulse shopping. this money is for EMERGENCIES only.

So when do you use this money? if a vital appliance breaks or needs repair. I’m not talking about a blender. I’m talking about a refrigerator, air conditioner, stove or car. If you have to fly across the country for a funeral, use some of the emergency money. that usually constitutes an emergency. Deaths are not usually planned.

Be sensible. Use the fund when you really need to, not when you want to. these are two different circumstances. focus on the need, and you should do pretty well.