A Few Reasons Why You Should Start
Having an emergency fund is never a bad idea. It can come in useful for those times when life decides to throw you a curve ball. But, What is an emergency fund and how do you get one started? It’s simple.
So what is an emergency fund exactly? An emergency fund is nothing more than reserve cash. Basically, it’s an account where you chip in a certain amount on each pay day to create a financial reserve to carry you through hard times. If you were off work on the sick for a while and couldn’t get government support, your emergency fund backs you up to help pay for bills, food and rent.
The important stuff in life. That’s it. That’s your emergency fund.
Bank & Roll
If you are thinking of starting an emergency fund, talk to your bank. Most banks allow you to open a standard savings account or an Individual Savings Account (ISA), but, depending on your bank depends on what rules and laws are set out that entitle you to certain accounts. Your local bank will help you explore the options available to you to help you get set up and started with a first payment.
After that, all you need to do is add to it each month and that’s your emergency fund.
If you can’t get to the bank for whatever reason or you’re unable to obtain a second or ISA account, create a cash jar where you can chip your loose change away and let it accumulate over time. It’s not the best way to create an emergency fund because there’ll be temptation to spend it, especially if it’s in plain view everyday. However though a start is a start and again, it’s never a bad idea to have some extra cash on hand for those cash-strapped days.
If the above two steps don’t work for you, you can always find someone you trust implicitly to hold the cash for you. Just make sure they are trust-worthy because over time they are going to be holding onto savings that are essentially for an emergency. The last thing you need is them not handing over the cash when you need it most.
The first tip – is ideally the best step of the lot, but not everyone will be able to open a second account or even an ISA and temptation may get the better of them in the second tip. If that’s the case, do get yourself a trustee for your emergency fund, just be cautious who you give responsibility over it.