Sunday, February 15, 2009

Starting an Emergency Fund

Over the past couple months, I have decided to take up my mother's advice, and start a type of semi-emergency fund. I'm not talking about the emergency funds that the big boys in personal finance talk about, which apparently should be anywhere from 3-6 months of your salary in case the worst happens, I'm talking about a smaller version that we all can live with. The premise for this account is simple - open another account at your bank or credit union (I just call mine "extra") and set the account to take out a small amount, like $10-$20 per paycheck, out of your savings or checking account (where ever you put your paycheck).

Because it is such a small amount of money, you hardly even notice its gone. Over time, this amount will build up, not to a staggering amount by any means, but something to aid you in case your washer breaks, or the car needs repairs. The blow seems less detrimental to your budget when you already have an account set up for that sort of thing. I have had no real need to use this account yet, but now that I have saved up a decent amount, I would feel sort of sad if I had to take from it, which is a new experience in comparison to my normal bad spending habits.


Loan Modifications said...

yup your mom is right. as early as today we should be saving for our future through this saving funds.

Sofia Britts said...

Props to your mom for that awesome advice! Now you know where you got your frugality from. ;) It's best to start low when building up your own 'junior' emergency fund. But as soon as you get the hang of it, take it up a notch by increasing the amount that gets automatically transferred to your savings. If I may ask, what's the biggest amount you've allotted for emergencies?

Thomas Watson said...

My target is to have a fully funded emergency fun in 2 years.