An emergency cash fund is a fund that you can use for any emergency financial situation. People tend to spend more than what they earn and fall into debts. Such a situation is also likely when a medical emergency arises, leaving them with no money to spend.
To avoid all this, an emergency cash fund is a must.
It’s easy to fall into a debt trap and very difficult to get out. There are many online websites like PayDayMe.com that provide payday loans online. These loans do get approved quickly, but they have to be paid back within a month.
Even though there is an option to avail these payday loans, it’s not a suggested alternative to saving up for an emergency cash fund. Here is a guide on how to save up those extra bucks for any emergency purpose.
Alternate Bank Account
If you’re saving up money for the future, you need to be as far away from it as possible. One of the ideal methods is having an alternate bank account. This account can be any basic account, with preferably a high interest rate.
Usually, a savings account with a high rate of interest is the best for any kind of saving. While this can vary according to how much you wish to save, such an account allows the interest to accumulate over time. Resultantly, giving you more money than you initially deposit.
Saving up Whenever you get Your Pay
For a typical 9am-5pm job, people get paid every month. A small percentage of your pay, at least a minimum of 10% must ideally go into the emergency cash fund. This will add up overtime to create a significant amount of money, which can be used to cover all your emergency expenses.
If you tend to forget the deposit dates, you can set up an auto payment facility from your current account so that you don’t need to constantly worry about depositing the money yourself. The bank will automatically transfer the money into your savings account on the day you get your salary or on any specified date as instructed by you.
The emergency cash fund can be a minimum of your 6 months worth of pay or even more.
In order to have an emergency cash fund, you must set a goal first. A figure that you want to save up, it could be a few months of your pay or a definite amount that you have in mind. If planned well, this emergency cash fund can help you out even after your retirement.
The best figure for an emergency cash fund, is a year’s worth of your pay.
This fund could cover the immediate expenses before your insurance handles the rest in case of an emergency.
Even after retirement you need some savings to back up your payments, this emergency cash fund will come in handy then. All your medical bills and even your day to day expenses can be covered without any worries of bankruptcy. If you have a bad credit you can still apply for a loan.