|Chapter 4: Emergency Savings
You probably don’t want to think about the troubles that could occur in the future, but unfortunately, bad things can happen to good people – more than once. Should you be hiding under the covers, shaking in fear? No. But it is a good idea to do what you can to prepare.
One of the best things you can do to prepare for the unexpected is to save. With savings, you don’t have to put unexpected car repairs or medical bills on your credit card or worry about how you will pay your mortgage and electric bill if you lose your job. Financial experts recommend establishing emergency savings of at least three to six months worth of essential living expenses. If you do not already have that amount, determine how much you can set aside each month until you reach your goal. Since you don’t know when you will need the money, make sure that it is put in an account that is easily accessible and where there are no penalties for early withdrawal. A savings account is usually a good choice.
Saving is easier if you make it an automatic process. If you have direct deposit through work, you should be able to have a portion of your paycheck deposited into your savings account. Additionally, many financial institutions allow you to set up a periodic automatic transfer of funds from your checking account to your savings account.