How to keep an emergency fund for unexpected expenses.
Emergencies happen all the time. Are you prepared? Many people weren’t financially prepared for a global pandemic. Luckily, the government stepped in with financial assistance and supportive programs.
In the case of a personal financial emergency, there wouldn’t be a stimulus check to help you get through. According to the
Many people are living paycheck to paycheck and are not financially prepared for an emergency. Discover what an emergency fund is and how to maintain one to protect your finances when the unexpected occurs.
What is an emergency fund?
An emergency fund is savings set aside for unexpected expenses. When these expenses arise, they can be stressful and expensive. Some common costly emergencies people face include:
- Car problems
- Home repairs
- Medical emergencies
- Dental bills
- Job loss
- Travel expenses that are unplanned
Many people live paycheck to paycheck, so putting money aside isn’t easy. However, even making minor changes can help you put some money away for the unexpected.
What are the benefits of an emergency fund?
Having an emergency fund has several benefits. Here are just three benefits to having one.
- Reduces stress
Having an emergency fund can help reduce some of your stress. Being prepared with a stash of cash can help you tackle unexpected expenses. You won’t have to worry about where the money will come from when bills are due.
- Reduces impulse buying
Instead of impulse spending on things you don’t need, the funds are transferred to an account where they can be saved for a rainy day.
- Can prevent poor financial decisions
If you have emergency funds, you are less likely to put expenses on a high interest credit card that can be difficult to pay off.
How do I maintain an emergency fund?
One of the best ways to maintain an emergency fund is to send the funds to a separate account. This way, you don’t have easy access to spend the funds. A great place to put emergency funds is a high-yield savings account. These accounts have higher interest rates than traditional savings accounts, so you will earn more money on the money you keep in the account.
Keep in mind, high-yield savings accounts can require minimum balances, so you may need to start saving in a traditional account and transfer the funds when you have reached the minimum required. It can take two to three business days for transfers, making it harder to access your cash quickly. This can be a good thing because it gives you time to consider if you are spending wisely. However, it’s not convenient if you need the cash immediately.
An emergency fund is an important financial resource. It can help you cover unexpected or emergency expenses and prevent you from taking on high-interest debt. You can maintain your emergency fund easier by putting it into a separate account, so that it’s harder to spend. You can also earn money on your savings by putting it into a high-yield savings account.
If you encounter emergency bills or unexpected expenses and don’t have an emergency fund or enough funds in your account, Uprova.com can help. You can request up to $5,000 in personal loan funding online. Learn more now.