Posts Tagged ‘emergency savings’

The Importance of Having A Family Emergency Fund

One of the most important things you can do for your family today is to understand the importance of having a family emergency fund. With the American economy still in critical condition, many Americans are still losing their jobs. Is your family prepared for a sudden loss of income, or a major car repair? There are so many reasons to have an emergency fund to protect yourself and your family.

The worst case scenario of course would be to lose your job. And what would happen if you and your spouse both lost your jobs? The sudden loss of income would be devastating to your financial health. Many Americans are turning to using their credit cards, or using their retirement plans and racking up debt and getting hit with high fees. A family emergency fund that is easily accessible is the perfect solution.

Of course losing you job isn’t the only reason to have a family emergency fund. There could be a sudden illness, a serious accident or death of a family member that could potentially keep you out of work for an extended period of time. If you don’t have a family emergency fund, you may fall behind on your house payments, car payments and basic living expenses could be hard to meet. Family emergency funds can also be used for car repairs, appliance repairs, or even a sudden need of medical services.

Most experts suggest a family emergency fund should consist of three months to a year’s worth of living expenses. The amount of your monthly expenses, not income is the amount you will need to figure. This amount should include all of your credit card payments, house or rent payment, car payments, insurance, as well as groceries, gas, spending and any medical prescriptions or medical office visits. The best idea is to take your last three months’ worth of expenses and come up with your average monthly expenses.

If you don’t already have a family emergency fund, you should start immediately putting a little bit of money away each week. Any extra money currently in your budget should start going in to your emergency fund. Even if it is only $10 a week going in, at least it is a start. Cut back on any extras for a little while, so you can build up your fund faster. Before long you will eventually have enough money put away. You should consider saving for your family emergency fund before you start saying for your retirement.

Do not take risks with this money by putting it into a mutual fund to try to make more money on it. It should be easily accessible and instantly available to you. Remember, it is there for emergencies, so do not use the emergency fund for anything other then emergencies.
Once your family emergency fund is in place, you should be able to rest easy knowing that in the event of any unforeseen emergencies, you will be able to continue to provide for yourself and your family.

Learn more about other tips to keep you out of debt.