{"id":715,"date":"2011-06-08T07:00:19","date_gmt":"2011-06-08T12:00:19","guid":{"rendered":"http:\/\/www.patheos.com\/blogs\/faithandfinance\/?p=715"},"modified":"2011-06-08T07:00:19","modified_gmt":"2011-06-08T12:00:19","slug":"what-is-an-emergency-fund","status":"publish","type":"post","link":"https:\/\/www.patheos.com\/blogs\/faithandfinance\/2011\/06\/08\/what-is-an-emergency-fund\/","title":{"rendered":"What is an Emergency Fund?"},"content":{"rendered":"\n<\/head>

An emergency fund needs to be a part of every person\u2019s financial picture.<\/a> There\u2019s just something about having money set aside for emergencies that can really alleviate worry and help you to meet other financial goals<\/a> that you\u2019re working towards.<\/p>\n

If you don\u2019t know where to start with an emergency fund, I\u2019d recommend starting with a $1,000 goal.\u00a0 This is pretty common among financial experts as $1,000 can cover quite a bit of unexpected expenses.<\/p>\n

If you\u2019re a fan of Dave Ramsey, he suggests that you put $1,000 aside in an emergency fund then pay down debt as fast as you can.\u00a0 Once you\u2019re free of debt, you should concentrate on building up 3-6 months of expenses within your emergency fund.\u00a0 If you have monthly expenses of $2,000, this means you should have a goal of $6,000 to $12,000 in a dedicated emergency fund.<\/p>\n

Where to Keep Your Emergency Fund<\/h2>\n

You should consider three things when deciding where to keep your emergency fund.<\/p>\n

Accessibility.\u00a0 Interest.\u00a0 Safety.<\/strong><\/p>\n

Accessibility<\/strong> \u2013 If you keep your emergency fund in a savings account with easy transferability to your checking account, you might be tempted to occasionally dip into the account.\u00a0 Sure, you can build it right back up, right? But that\u2019s a vicious circle that can really keep your emergency fund from growing.<\/p>\n

Consider keeping your emergency fund in a separate bank or online account that can still be accessed without too much trouble.\u00a0 You just don\u2019t want to fall into the trap of using your emergency fund for non-emergencies.<\/p>\n

Interest<\/strong> \u2013 Instead of earning 0% in a checking account, your emergency funds can work harder for you in a savings account, especially with online banks.\u00a0 Two great online accounts that come to mind are ING and Ally Bank.\u00a0 The ING Orange savings<\/a> has paid over 1% for quite a while and so has the Ally Bank online savings options<\/a>.\u00a0 This may not seem like much for your $1,000 emergency fund, but as your account grows to cover 3-6 months worth of expenses, you\u2019ll be happy to see a few extra dollars in interest each month.<\/p>\n

Safety<\/strong> \u2013 I hope we don\u2019t see any bank failures in the near future, but having insurance on your money is another way to have peace of mind as you focus on paying down debt.\u00a0 Save with a bank that provides FDIC coverage or a credit union with NCUA.\u00a0 That way you\u2019ll know your funds are safe in case your bank happens to fail (which is unlikely, but still possible).<\/p>\n

What Counts as an Emergency?<\/h2>\n

Good question!\u00a0 While there\u2019s no hard and fast rule on what should be considered an emergency, you can use these suggestions as a guide to help determine if a situation is an \u2018emergency.\u2019<\/p>\n

Can you tighten the budget for one month?<\/strong><\/h3>\n

I know your budget is tight already, but before you dip into your emergency fund, look to see if you\u2019ve used up all your budget money.\u00a0 If you can use your eating out, entertainment (movies and coffee) and other fun money to cover the unexpected expense, you\u2019ll better off than dipping into the ol\u2019 E fund.\u00a0 Trust me, it\u2019s more difficult to payback the emergency fund than it is to go without a movie or eating out for a month.<\/p>\n

Can it wait? No really.\u00a0 Can it wait?<\/h3>\n

Again, there\u2019s no real concrete rule for this, but if the expense can wait, try to hold off.\u00a0 During the war times of the 30\u2019s and 40\u2019s, you\u2019d see people living this phrase:<\/p>\n

Use it up, wear it out, make it due, or go without. <\/em><\/p>\n

Write that down and put it in your wallet.\u00a0 The next time you\u2019re about to replace or buy something as an \u2018emergency\u2019 think about this quote and be honest with yourself.<\/p>\n

If you do have to use your emergency fund, make sure you have a plan to pay it back as fast as you can!\u00a0 I hope you\u2019re able to create an emergency fund and stick with it.\u00a0 I\u2019m sure you\u2019ll find that it makes those unexpected expenses a little easier to manage \u2013 especially when you\u2019re trying to pay down debt<\/a>!<\/p>\n

Have you created an emergency fund?\u00a0 Have you ever needed to dip into it?\u00a0 How did you pay it back?<\/strong><\/p>\n

<\/strong><\/p>\n

<\/strong><\/p>\n<\/body><\/html>\n","protected":false},"excerpt":{"rendered":"

An emergency fund needs to be a part of every person\u2019s financial picture. There\u2019s just something about having money set aside for emergencies that can really alleviate worry and help you to meet other financial goals that you\u2019re working towards. If you don\u2019t know where to start with an emergency fund, I\u2019d recommend starting with […]<\/p>\n","protected":false},"author":2551,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[17,26],"tags":[],"class_list":["post-715","post","type-post","status-publish","format-standard","hentry","category-general-personal-finance","category-1saving"],"yoast_head":"\nWhat is an Emergency Fund?<\/title>\n<meta name=\"description\" content=\"An emergency fund needs to be a part of every person\u2019s financial picture. 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