Emergency Fund: Save for that Rainy Day

These days it is more important than ever to have an emergency fund prepared for the inevitable. You could become ill for a long period of time or your car may require some major repairs. There's always a chance you could get laid off or fired. Your company could downsize. The list of possibilities goes on. So, for obvious reasons it's advisable to be prepared.

When preparing your family budget make an emergency fund an integral part of your plans. You should save about three to six months worth of living expenses to put in an emergency fund. These expenses are the bills you would normally pay during the month like your mortgage if you own a home or if not, your rent. It includes insurance payments on vehicle, home and life. Include electric, water, and gas bills or other utilities you may need. Don't forget about credit card or loan payments. Include your phone and cable bill and don't forget to include food and gas. Always find out what the entire premium is for your health insurance and save enough to keep it going for 3 to 6 months. If you get sick or laid off you will have to pay the whole thing.

Experts say to save six months because that is the amount of time it takes to get a new job. However, it might even be longer in the current economy. It is really difficult to save that much but it is possible. An emergency fund can be started with just a little bit of sacrifice and scraping along.

Starting an emergency fund can be daunting but if you start out small it should be less of a sacrifice. Set up a budget and do not waiver from it. Also set up some goals and try to reach them as best you can, but don't make them unobtainable. You may have to give up a few things like eating out, setting your thermostat down or up a little, or getting rid of the cable for a little while.

Go to your bank and see if they will let you set up a savings account or a second one if you already have one. Most banks will let you have more than one savings account. What ever you do don't let this account have a debit card. It is too tempting to use if you can get to it with just a password. Make sure to earmark a percentage of what you get in your paycheck to go into this special account.

Direct deposit is a great invention. You will be able to have a certain amount or a percentage to be put into this fund via direct deposit if you have your paycheck put into an accompanying checking account. If your emergency fund is at another bank remove the money from your paycheck before you pay for anything else. If you get any extra money throughout the month use it for your emergency fund. This would include work on the side or overtime. If you go to eat at restaurants two times a week cut that down to one and put the money you would have spent in the emergency fund.

Your emergency fund will grow eventually and it won't even be hard after you get used to it. When you get a good deal of money in the account think about removing it and getting a Certificate of Deposit or CD or putting it into a money market. Make sure to ascertain where you will get the most interest. Do not put it into the stock or bond market and a mutual fund. You could loose it all in a blink in today's economy. It might be necessary to get your money fast for an emergency and it will take too long to get it.

Illness and job loss are not the only things that can cause you to need an emergency fund. Owning a home can open a whole can of worms when the furnace stops working or the roof starts leaking. You will have to come up with money quick and you don't want to take out a second mortgage. If you rent it is possible that you may have to move in a hurry and you would have to have a security deposit and expenses for moving. You might have an accident and have to purchase another car. These are just a few reasons you may have to dip into an emergency fund so even if you can only put ten dollars a pay into one, it might be wise to do so.