Personal Finance – 4 Useful Tips to Set Up an Emergency Account
Many people would tell you they are saving for their retirements. Is it the 401k plan they are talking about? In that case, it is just not enough. Do you know that you actually need a special emergency fund? It is also known as a rainy day fund or savings.
What if the insurance coverage is just not enough? The need extra amount of money to make a difference between living and death? A business opportunity that you just could not pass up, which can be referred to your call in life?
The truth is, we all need an emergency fund. This amount of money in the bank is different from savings. But some folks make it the same. Savings and emergency are bundled together into one account. That is fine too.
Are you ready to commit towards setting up a rainy day account? If so, please indulge in the techniques used by financial savvy people:-
Never put your money in an account that offers nice amount of returns (e.g. high interest rates) annually but does not allow you to withdraw it within a period of time (e.g. 5 years)
If you are dumping your money into an investment account, this is fine. You could keep the money in the account for as long as 30 years and reap the benefits later on. But this is not the case for an emergency fund.
Bad things happen in life. Most of the time, these events require the need for money. You might not want to put your money into the said account (that withholds your money for a 5-year period) because if you do withdraw from it, the time and effort of investing into this account is overridden. Instead, have a separate bank account that enables you to get the cash out immediately anytime, anywhere.
Emergency cash reserve is an assurance for you
Other than covering life disasters, this amount of money can be used for helping in business when the time comes. The money can not only be used for hefty medical operations, but also business investments.
Keep watch of your cash savings
You need to constantly update yourself of this amount of money. The fund size can expand or reduce in size as time progresses. You would not want to know about a zero value bank account when the real emergency arises, would you?
Credit card is your friend
Most of the time, it is your enemy. But in a specific time period, spending on credit gives you the opportunity to reorganize and put things (your finance) back into place.