In today’s challenging times, you can’t afford to be broke. Having a personal emergency fund, however, can help you survive financial disasters. Compared to securing loans, an emergency savings account provides a long-term solution.
How to build your emergency fund
Whether you’re an employee or a business owner, you should make it a point to save some of your income for your emergency fund. How much of your income should you save? Financial experts offer different guidelines so you may want to do a bit of research and pick the one that suits you.
You may choose to save for up to three months’ worth of your salary or six months’ worth of living expenses. Or you may decide to pay off debt before saving for three to six months’ worth of expenses. Just remember to put your fund into a high interest savings or money market account. This way, you earn interest and avoid losing your money’s value due to inflation.
How to keep your hands off of the funds
As the name suggests, emergency funds are meant for urgent financial situations. This means you should never pull from the funds to pay off miscellaneous expenses or spend them on special events such as birthdays or graduations. If possible, simply open a separate savings account for those purposes. You may also want to purchase an individual health insurance plan in Oregon to cover for medical emergencies. This will ensure you won’t be touching your emergency funds while you’re still building them.
There are different ways to overcome a financial crisis. You may apply for a bank loan or borrow cash from friends or relatives. But nothing prepares and equips you better than your emergency savings account. Once you have built your emergency fund, you’ll feel more confident in the event of financial hardships.