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Setting Up An Emergency Fund

Feb. 3, 2021, 8:48 p.m.   qualiacredit  

Whether you call it rainy day savings or an emergency fund, the need to save up a sum of money that you can use at a moment's notice is real one that many people ignore. Twenty or so years ago, financial experts suggested that people put away enough money to cover all of their living expenses for a minimum of three months. Today, that number has been increased to six months' worth of living expenses. For many families, this doesn't seem plausible. After all, when you live from paycheck to paycheck and debt collectors are calling, it isn't always possible to find any money to put into savings.

First Step - Open an account

A great way to start an emergency fund is to set up a bank account solely for this purpose. Many banks allow you to open a savings account with as little as one dollar. If your bank isn't one of them, search for a different bank that does offer such a low opening balance. If you are really having difficulty financially, start with a jar at home where you can place any spare change that you come across. Check the pockets of all of your coats. Look in between the sofa cushions. Pick up the penny that someone dropped in the parking lot. Once you have a full dollar, go to the bank and open up your account.

The Second Step - Any deposit is a good deposit

Once you have your emergency savings account opened, you can add any amount that you want to it. Don't worry about what the bank teller will think. Just do it. You need to start somewhere, and now is as good a time as any.

The Next Step - Strategize

Find ways to save more money and put that money into your emergency savings. Choose a cheaper brand of toilet paper for one week and put the difference into your savings fund. Stop using condiments and use the money you save for your next deposit. If you start looking for ways to come up with money, you will find them even if it means taking a part-time job for a couple of months.

The Final Step - Be consistent

Continue putting money into your emergency fund until you have enough to cover at least three to six months of living expenses. Each year, add another ten percent into your fund to help you keep up with increases in the cost of living. If this account is not an interest-bearing one, switch your money into one that is. Once you have your emergency fund in place, you can start building up your RRSP.

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