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Finding the money that you need to take care of unexpected
situations can be difficult; many people are unprepared for the
unexpected, and sudden changes in their lives can create debts
that they can't easily recover from. In order to be prepared for
unexpected situations that may arise, financial experts
recommend that individuals create an emergency fund that
contains at least the amount that the individual requires to get
by for a period of two months. Of course, most people have
difficulty maintaining that much of a buildup... if they attain
it at all.
There are a variety of methods that can be used to help you
build an emergency fund, however; several of the most common are
listed below so as to help you in creating your own fund to
better prepare you for the unexpected.
Certificates of Deposit A common way to try to build up an
emergency fund is the use of shorter-term certificates of
deposit. Individuals can put the amount that they have built up
through other means into six month or one year certificates,
using the penalties for early withdrawal as an incentive to not
cash them out until after their maturity.
Once the certificate has matured and the interest has been
collected, the individual can then either transfer the amount
into a savings account or they can put it back into another
shorter-term certificate.
As time goes by, the additional interest will help to build up
the emergency fund aided by any additional deposits that the
individual makes into the fund.
Rounding Up Cheques
Another method of building up an emergency fund involves
rounding up written cheques to the next highest whole amount,
thus leaving a small amount in your chequeing account that isn't
accounted for in the cheque ledger. Though each cheque written
will only yield a small amount of "hidden" funds, as more
cheques are written that amount will continue to grow.
At the end of each month, you should inquire as to the actual
balance of your chequeing account and transfer the difference
between your actual balance and the balance listed in your
ledger into your savings account. This method can help to build
funds especially well if it is combined with other methods as
well.
Building a Buffer with Pay Raises When you receive a pay raise,
it can be a great opportunity to begin putting aside savings in
order to build an emergency fund. Instead of using all of your
payroll cheque, calculate the amount of it that is from the pay
raise and deposit that amount into your savings for your
emergency fund. Since this is an additional amount to what you
were used to previously, it shouldn't be as difficult to set it
aside instead of using it directly.
Once you've built up the balance in your savings account, you
can later begin putting your raise amount into your chequeing or
dividing it between chequeing and savings.
Putting Pocket Change to Work
One method of building an emergency savings that is often
overlooked is the pocket change that you have left over at the
end of the day. By designating a container for collecting your
change and spare small bills, you can slowly build up a
significant amount in much the same manner that you would if you
were rounding up cheques that you write.
You can deposit the contents of your change container either
once per month or whenever the container gets full. Like all of
the methods above, this can work best when combined with other
methods.
You may freely reprint this article provided the following
author's biography (including the live URL link) remains intact:
About the author:
John Mussi is the founder of Direct Online Loans who help
homeowners find the best available loans via the www.directonlineloans.
co.uk website.
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