Saving For That Rainy Day – Creating An Emergency Fund
It’s the nightmare scenario that no one wants to happen. The company lays off seven thousand jobs and your job is one of them. A natural disaster strikes and you lose your house. You were hospitalized and your medical insurance doesn’t cover all your bills. You can’t make the payment on an outstanding debt and your car will be repossessed or your electricity shut off.  An emergency fund can help you through it until you’re finally back on your feet.
An emergency fund is easily accessible cash savings that you can use in case of dire need. Your dream vacation or that expensive toy that you want to splurge on does not qualify as dire need. If you spend that money – what are you going to do when the real emergency finally happens?
It’s never too soon to start building your emergency fund and this is how you can start.
Decide How Much Money You Need. Set a small but reasonable amount and once you reach that goal, increase it again. That way, you are motivated to keep on going and nothing beats the security of knowing you have extra cash stashed away when you really need it.
Decide How Much You’re Going To Put Away. Again, start small and add as you go along. Carefully consider your budget. Think about your household expenses against your monthly income and start putting away even a small amount every payday and add to that as you can afford it.
Create A Separate Savings Account. You will be tempted to dip into the emergency fund if you don’t keep it away from your active checking and savings accounts. It’s better that you keep it away to reinforce the notion that this is not something you want to dip into just for an impulse purchase. It would be even better if you can set it up so that a certain amount of money is funneled into this savings account through automatic transfer or direct deposit, making it easier to save.